3 Easy Steps To Donate a Car and Get a Deduction

At one time or another it will happen to just about everyone. You will get your W-2's from your employer, and sure enough you made some money!

That is a good thing right? Yes and no. It is a good thing as long as you had the adequate amount of taxes deducted during the year, but what if you didn't? What if you owe the government money on April 15th?

This can be a scary situation for most people, and can end up costing you dearly. What do you do if you owe the government more money than you have?

Find a deduction! If you have an old car sitting around or one that isn't running, they will work perfectly. Maybe you even have a car you've thought about trading in, that will work as well.

Here are 3 easy steps to an income tax deduction by donating a car (or other vehicle).

1. Do your homework.

There are many sites on the internet that offer free information about donating a vehicle. Is your vehicle worth more than $500? Can you deduct the full amount? Can you donate a motorhome? It is best to get this information from a third party so that they will not have a stake in what they are telling you.

A great site for information on donating a car can be found at Car Donations Online. Car Donations Online is a third party organization with no financial ties to any charity or nonprofit company.

2. Find your charity or nonprofit organization.

Do you know someone with cancer? Have you had a kidney related death in your family? Do you attend a church? Do you support pro-life movements? I would recommend finding a charity that you can be proud to donate a car to.

If you don't associate yourself with any charities that accept donations anywhere in the world, get out more often! There are literally thousands of charities and not for profit companies that accept donations, you will be able to find one that fits what you like.

3. Make your donation, and make sure it's deductible

For the majority of people, your full donation will be deductible. For some people, that may vary by state and by income. If you need advice, consult a tax professional.

Make sure you get a receipt for your donation, you may need it if you ever are audited. You may also need your receipt if you have your taxes professionally prepared.

Next time you get in hot water with the IRS, just donate a car!

donate your car

The IRS advises that taxpayers contemplating car donations ask many questions and carefully consider just how much of the proceeds from the car will go to their intended charity. A recent federal study indicates that in many instances such vehicle contributions may help the intended charities far less than taxpayers.

Indeed, the IRS reported that a California study revealed that 80 percent of charities contracting with fundraisers to run their car donation program received less than 60 cents for every dollar value of vehicle

The IRS advises that, before making a car donation, you make sure that the organization is qualified, that you speak directly to the charity, and that you examine state filings for more information.

To take advantage of the deduction, you must itemize your deductions on your tax returns, deduct only the car's fair market value, and document the charitable car donation.

Donate a car today

Car donation refers to the practice of giving away no-longer-wanted automobiles to charity organizations. In the United States, charitable donations provide a tax benefit; as such, this type of giving has become very popular in the early 21st century. For values less than $5000, the value of the tax deduction comes from the donor's own estimate of the car's value, even if the charity receives much less money from actually selling the car (usually at auction).

Some critics have claimed that this is essentially a tax shelter. However, non-profit organizations in the US have come to rely increasingly upon the revenue from car donations. This type of donation has become increasingly widespread in the U.S.; in 2000, 733,000 taxpayers reduced their taxes by $654 million.

Many charities run donation programs. Some have their own car lots which sell the donated cars but many have their donations processed through auto auction companies. At least one charity exists which collects and sells donated cars and distributes the money to whichever charity the donor indicates. This allows car donation income to flow to charities which do not run their own programs.