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Getting a Car Donation Tax Deduction

It's simple - donate a car, get a tax deduction - right? True (in most circumstances) but not necessarily simple. Making a vehicle donation is the first step in generating a deductible event, but how the (potential) deduction is applied and how valuable it turns out to be depends on the tax payers situation.

Placing a Value on Vehicle Donations

First off, to find out specifically how much benefit you will receive from donating your vehicle to charity, you'll want to contact your tax professional. The information contained on this page may be helpful, timely, and accurate, but we offer no guarantee that it will apply to your specific situation.

Now let's take a look at how a vehicle donation generates a tax deduction. When you donate a vehicle to charity, the general idea is that, just like any donation of value, you should receive a tax deduction commensurate with the monetary value of the item you donated. The two factors that determine how much the deduction is worth (to you) are:

  1. The value of the asset
  2. The tax bracket you happen to be in

There was a time when the value of your vehicle could be estimated by you or the charity you are donating to, but no more. Now, the value of the vehicle is determined by the actual value received at auction (see our FAQs page, questions #9, #11, and #12). This fact is one reason for dealing with charities and vehicle donation processing companies (like Charitable Auto Resources) having the expertise and industry contacts to get you a high value for your car - generally, the better the value received, the better your tax deduction.

Regarding your tax bracket, you may not have much control over this. Your tax professional can advise you about things like delaying certain payments until the following tax year in order to lower your taxable income for a given year (or vice versa) to get the most advantage from your car donation tax deduction, but the bottom line is, whatever your tax bracket is, it will affect the dollar amount you recoup by making a car donation.

And along those lines, if you already have more than enough deductions reducing your current tax liability, it may be a good idea to speed up or delay your vehicle donation so that it lands in a taxable year which needs additional deductions. Again, your tax advisor can give you the professional help you need to determine your best options.

Tax Forms for Vehicle Donations

The United States Internal Revenue Service (IRS) has extensive information online about vehicle donations. You can start here to conduct in-depth research on vehicle donations. But of course, before you can file your taxes and receive a deduction for that old BMW, you need to have properly filled-out tax forms documenting your donation.

Fortunately, excellent vehicle donation processing companies like Charitable Auto Resources provide all the forms you need, properly signed and sealed for use by your tax preparer. See our FAQs page, questions #7 and #8 for more information.