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How to Donate Your Car to Charity and Earn a Tax Deduction

How to Donate Your Car to Charity and Earn a Tax Deduction

Making donations to charitable organizations can help you make savings on the amount of tax you pay. You can make significant tax savings if you learn how to donate your car to charity and earn a tax deduction.
How to donate your car to charity and earn a tax deduction depends on various factors but the deduction depends on the way the charity uses the car. If the charity sells the car, then the selling price will form the basis of computation while the fair market value of the car is applied in all other cases. The following are the steps to follow in the process.
Determine the price at which the charity sold the car
If the charity sells the car, the basis of the deduction will not exceed the price even if the market value is higher. The market value of the car is used if the charity keeps it for its use or sells to a needy person at a discount.
The fair value of the car
The IRS requires taxpayers to follow reputable used-car guides to determine the amount to deduct when making their claims. The guides are available from local libraries or the internet. It is important to learn how to donate your car to charity and earn a tax deduction.
Lodging the deduction claim
The amount of the deduction is indicated on line 17 of the Schedule A. A valid claim requires you to itemize the value of the donated car. You will need to file additional files if your car donation is in excess of $500. You will need to fill Section A of the form for a donation of between $501 and 5,000 and Section B for amounts above $5,000.
For the claim to be accepted by the IRS you need to know how to donate your car to charity and earn a tax deduction. Documents indicating your name, date of the donation, the vehicle's identification details and a statement showing any goods or services you received in exchange should be attached to the claim.
Donating a car to charity and getting a tax deduction can be simple, but you do need to pay attention to what you're doing.

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