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Car Donation Tax Deduction Overview

As a courtesty for those who are not familiar with how tax deductions work
for a car donation here is a Tax Deduction Overview.


This webpage is about how a tax deduction
works for a car donation.



IMPORTANT DONATION INFORMATION UPDATE!

TWO FREQUENTLY ASKED QUESTIONS AT THE END OF THE YEAR:

QUESTION #1:

Will my donation be good for the year that I sent in the donation form, even if I don’t receive the receipt until the beginning of the New Year?

ANSWER: YES!

IRS Publication 4303, “A Donor’s Guide To Vehicle Donations” states:

“… the written acknowledgment must contain … the date of the contribution…”

The date of contribution is the date that we received the donation form. So it can even be on the 31st of December and will still be for that tax year.

The only exception might arise if you cancel the donation and then resubmit it later, or if the donation is canceled by us or the towing/auction facility due to reasons of inability to make pick up arrangements or lack of proper vehicle documentation, etc. Generally if you work with the towing/auction facility and assist in any problems that might arise then your donation will still be considered effective the date you filled out the donation form.

QUESTION #2:

If I submit the donation form on the last few days of the year and the towing/auction facility does not pick up the vehicle until the beginning of the New Year does the donation still count towards the current year, i.e. the year I submitted the donation form online?

ANSWER: YES!, as stated above.

You can proceed at any time to our online car donation form to begin the fast easy and safe car donation process.

1. Basic Tax Proceedure.

2. Tax Deductions.

3. Standard Deductions.

4. Who qualifies for a tax deduction for a car donation?

5. Itemize Deductions.

6. What if you do not Itemize Deductions?

7. New Tax Law Simplifies the Donation and Tax Deduction Procedure.

 

NOTE: The following general overview is not an attempt to give you tax advice nor an attempt to professionally assist you in your personal tax preparation.

The purpose here is to just give an overview in layman's terms about how a tax deduction works for a car donation and who might qualify.

If you do not prepare your own taxes then you can probably rather easily find out if you qualify for a tax deduction by contacting the person that does prepare your taxes.

References to the IRS forms mentioned on this page are available in other areas of this web site.

 

 

 

 

1. Basic Tax Procedure

The basic tax procedure for most Americans is as follows:

  1. The person makes a certain amount of income in a year. This is called the "gross income."
  2. The IRS allows certain deductions from the total "gross income". What is left after the deductions are made is what is called the "taxable income".
  3. The taxable income is then taxed a certain percentage based on the income range. Generally the higher the income the higher the tax percentage. There are "tax tables" that establish how much tax a person pays according to their taxable income.

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2. Tax Deductions

The individual tax payer is allowed certain deductions to reduce their "taxable income."

There are two basic types of deductions:

  1. There is the standard deduction.
  2. There is itemized deductions.

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3. Standard Deduction

The IRS provides each tax payer a predetermined (standard) deduction for him/her self and dependents (such as a spouse and/or children below a certain age).

In order to receive more of a deduction than the standard deduction(s) the individual must have legitimate deductions that exceed the amount of the standard deduction(s).

If the individual's total allowable deductions are less than the standard deduction then the individual would receive the standard deduction.

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4. Who qualifies for a tax deduction for a car donation?

Basically to qualify for a tax deduction for a car donation (which is called a noncash charitable contribution) your total deductions would have to be greater than the standard deduction you would receive for you and your spouse and children (as applicable).

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5. Itemize Deductions

To be able to deduct these extra deductions you have to list them out completely. This is called "itemizing your deductions."

Some of the deductions that would qualify are as follows:

  • medical and dental expenses
  • certain taxes paid
  • certain types of interest paid, like home mortgage
  • gifts to charity
  • unreimbursed employee expenses
  • tax preparation fees
  • other deductible expenses.

These deductions would be itemized (listed out on the proper IRS forms). If these deductions amount to more than the "standard deduction(s)" then the person would benefit by "itemizing" his/her deductions.

In order to get a deduction for a car donation a person has to itemize deductions.

For a noncash charitable contribution, such as a car donation, the individual can deduct the value of his or her contribution.

In certain cases the individual can deduct the fair market value.

The amount the individual can deduct for their charitable contribution can reduce the taxable income by that amount.

Here is a similar explanation of this from the IRS.

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6. What if you do not Itemize Deductions?

However, even if you do not itemize deductions and thus cannot receive a tax benefit you might still wish to donate your car to receive the free pickup, to help the charity and thus help children, to dispose of the vehicle, and to avoid the hassle of selling the car.

That is basically how it works.

Why make an auto donation?

Your vehicle donation can help protect the environment.

We also have the recycling program for those that do not itemize deductions.

For those that cannot benefit from a tax deduction we do provide the recycling program.

We hope this has been of some assistance. This is not legal or tax advice. This is just some basic information. For more information you should contact the person that prepares your taxes.

Visit the rest of this site for all of the other tax deduction information including the actual references on the IRS website.

Tax Deduction Information and other donation alerts and information.

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7. New Tax Law Simplifies the Donation and Tax Deduction Procedure

Thanks to the new tax law, the IRS has taken the guesswork out of how to determine the value of your vehicle.

Beginning January 1, 2005 you may deduct the full price we receive for the sale of your vehicle. This greatly simplifies the process for you in several ways.

Under the new law, if your vehicle sells for more than $500 then the following applies:

  • If your vehicle sells for more than $500 you’ll know exactly the amount you may deduct, eliminating guesswork. Thus you no longer have to research and come up with an estimate of the fair market value of the vehicle.
  • The selling price of your vehicle becomes its fair market value and is what you can deduct on your tax return in most cases.
  • This also eliminates the risk of you getting into trouble by overstating the value of your deduction on your tax return.
  • This saves you both time and risk.

If you car sells for $500 or less at auction, you may deduct what you determine as the fair market value of your vehicle or the amount the vehicle sold for, whichever is less, and as long as that figure is under $500.00.

Here is the link to the new IRS information.

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You can donate your car by filling out the online donation form now.