- In 2005, the rules governing how much you can deduct for your auto donation changed. The benchmark for the deduction amount had been the fair market value of the car determined by one of the valuing agency publications such as the Kelly Blue Book. After the change in the law, only the proceeds from the sale of the car are deductible. That means the organization to whom you donate your car must notify you in writing with the actual amount of the sale, and that amount, which will likely be far lower than the fair market value, is the amount you are allowed to claim. You must include the paperwork you receive from the charity stating the car's final sales value in your tax filing.
- If you itemize your deductions on your tax form, you can donate a car to charity and deduct the charitable gift. If you don't itemize your taxes -- that is, if you use the standard deduction -- you cannot also deduct charitable donations. The organization to which you are donating must be a registered 501(c)(3) non-profit company that has filed form 1023 for charitable organizations with the IRS.
- IRS Publication 78 is updated each year with a list of qualified charitable organizations. It is possible that an organization that is not on the list is eligible, but if you are thinking of donating your car, it's best to choose one that is included. IRS Publication 526 offers details about charitable deductions in general and IRS Publication 561 has tips to help you determine the value of donated goods.
- To itemize your deductions and claim the amount for your donated car, you must use tax form 1040, not 1040A or 1040EZ. Itemized deductions, including your car donation, go on schedule A attached to the 1040. Submit your notification of sale from the charity to substantiate the amount of the deduction you claim.
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