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Donate your car for tax credit, deduction

Taking a tax deduction for your car donation to charity isn't very different from any other gift to charity. Accurate paperwork is keywhen listing all gifts at tax season. However, car donations are a little more complicated than most charitable gifts because the value of the car determines the specific form that must be filed with the IRS—and the value of the car is not always obvious.

Gross Proceeds

When you donate your car to charity and the charity sells your car—which is what happens in most cases—the value of your car donation is the gross proceeds the charity receivedwhen they sold your car. This amount will be listed in the acknowledgement the charity gives you and will become the amount of your deduction.

Fair Market Value

There are exceptions to the gross proceeds rule; these include:
  • The charity plans to use the car.
  • The charity is going to make significant improvements to the vehicle.
  • The charity plans to sell or give the vehicle to someone in need for a value less than the fair market value.
In the case of an exception, you can deduct the fair market value of your car—the price at which you could sell your car to a private party (not a dealership).
To calculate the fair market value of your car, start with its book value. Services like Kelly Blue Book offer online calculators that help assess the book value of your car. This is a good place to get a general understanding of how much your car is worth.
Once you have a good estimate for the book value, then you can determine the fair market value. Did the calculator take everything into consideration? For instance, are there expensive repairs needed that decrease the value of your car? If so, you must deduct that from the book value to approach the fair market value.
NOTE: If the statement from the charity indicates that the car was sold for $500 or less, you can deduct the lesser amount of either:
  • The fair market value.
  • $500.

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