There are many different reasons to donate your car to a charity of your choice. If you have a vehicle that you rarely use anymore, takes up space in your garage, and you no longer want, it may be the perfect time to donate your vehicle.

Making Donation Easy

In some cases, people interested in donating a car to a charity may not care about the tax deductions they could qualify for. reputable car donation charities may seem more appealing to simply have the charity come to pick up the car and title and take if off your hands.

For those people, the donation process is very simple, and it can be a relief to have the vehicle out of your garage. Other people may be interested in donating their vehicle to help out a good cause and receive the tax deduction benefits that come with making a charitable contribution.

The Donation Process

Depending on how many benefits you want to earn from your contribution, your tax deduction process can differ. If you intend to maximize your benefits and your vehicle is worth more than $500, you probably intend to claim full market value to reduce your total taxes.

This can make filling out your taxes more complicated than claiming basic exemptions or simply making a cash donation.

The Itemized Deduction

Claiming full market value for a car is a very difficult process, and the IRS (Internal Revenue Service) tries to dissuade people from completing it by creating restrictions on the market value donation qualifications.

In order to best understand how your contribution affects your federal income tax statements, you need to complete an itemized deduction tax form. If you don’t understand this form - or if you are unsure how to proceed after making a donation - you can go to a professional tax firm to have them complete your taxes or hire an enrolled agent, otherwise called a tax expert, to represent you before the IRS.

Finding a Qualified Charity

Not all charities are qualified as tax exempt organization that can provide tax benefits in return for donating cash and non-cash items. The only charities that are qualified are ones that have been approved by the IRS as “exempt,” some religious organizations, and charities that are a 501©3 organization.

If you aren’t sure on the status of the charity that you wish to donate to, you can search the internet for the charity and the qualification should be on its website. If the organization does not have a website, the IRS has a page that has a current list of the tax exempt organizations.

Fair Market Value vs. Cash Donations

In most cases, it is rare to receive fair market value for a donated vehicle. A variety of fees and underlying expenses accompany car donations, and it is fairly common for vehicles that make their way to charitable organizations to need quite a bit of work to bring them back to life.

More often than not, charities end up scrapping the cars that come in and then take the money from the scrap to apply it to the charity’s purpose. The IRS also limits the vehicle’s worth to the value that the charity has for it.

If a car will be used for a certain period of time to carry out the charity’s needs or if the charity sells the car at a significant discount to someone as a fulfillment of the charity’s philanthropic mission, the donation is set at the value of the charity’s use for the car.