For long people have been donating cars for tax deduction. For the last 10 years, more than half a million taxpayers each year have used the car donation to save more than half a billion dollars from their taxes.
Recently however, rules have change, and deduction car donation for charity is not what it used to be. But you can still use it for your advantage if you follow the rules. Yes, it is still possible to deduct a car’s full market value!
First rule: when you donate a used car (or new car), you’ll need to collect the right paperwork. Let’s say for example, you make a car donation in New York, and the buyer for this donation car is in Arkansas. When the car is sold and the money is given to your favorite charity, you’ll want to get a receipt for the sale. IRS car donation rules require you to have this receipt to qualify for a deduction.
From 2005 on, you must receive the receipt from the charity within thirty days of making the donation in order to be able to claim the deduction. But, more than ever, you need an expert to get the maximum reduction in tax liabilities that you are entitled to.
You don’t need an expert for the golden rule: for cars valued $500 or over, your deduction can be on the total amount of whatever the charity sells it for!
But you need an expert because to help you on how the charity uses the car, or else your deduction can suffer hard. In case the charity uses the car for a significant tax-approved work of charity, as described by the new law, then you are entitled to claim the full market value of the car.
Any organization that is an IRS approved 501(c)3 charity can be used for your donation (These are mainly qualified educational and religious organizations). Some churches are not required to be approved, but yet are qualified.
A good place to start is IRS own list of organizations. You can search for one closer to you or one that you like more. Keep in mind many have websites where all the donation process can be easily done.
Many can also schedule and arrange for pick-up services, at no cost to you. Of course the value of the car must exceed the cost of picking and/or towing it up.