Car donation is 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. For values less than $500, the value of the tax deduction comes from the donor’s own estimate of the car’s value, even if the charity receives less money from actually selling the car. Deductions for donations over this amount are limited to the sale amount of the vehicle (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.

Claim Fair Market Value
When filing your tax return, be sure to deduct the fair market value of the vehicle. This amount will take into consideration the condition of the donated vehicle. Claiming the full value of the car is not acceptable.

Itemized Deductions List
You must itemize your deductions in order to take full advantage of tax relief available to you. If you are claiming standard education, you will not benefit from this clause.

Charity Eligibility
In order for you to receive the benefit, the charitable trust must qualify with the tax department. Check a copy of Publication 78, available online and at public libraries, for a list of eligible charities.

Estimating Vehicle’s Fair Market Value
There are various factors to consider when determining the value of your car. Refer to a recent used car guide for precise instructions to evaluate your vehicle’s value. You may need to make adjustments depending on accessories, mileage and other indicators of its general condition.

Filing Your Charitable Contribution Deduction
Be sure to keep good records when claiming a tax deduction for your vehicle donation. Store all receipts and forms relating to the car donation, and a copy of its fair market value, in a secure place. And keep it for several years.If you are a taxpayer in the USA and you’ve donated a vehicle to charity, contact the IRS at 1-800-829-1040 to find out if your previous contribution is tax deductible. If you think that someone sought your contribution for deceitful purposes, speak with an appropriate state charity watchdog at the state Attorney General’s office.Donating a spare or unneeded vehicle is a very generous way to benefit your favorite registered charity. The charitable organization will thank you, and eventually so will the tax officer.

Before you donate your vehicle to a charitable organization: 

• check out the charity 
• see if you’ll get a tax benefit 
• check the value of your vehicle 
• see what your responsibilities are as a donor to a charity

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. Many processing companies also collect and sell donated cars and distribute the money to a charity the donor indicates. The processing company typically takes a percentage of the sale value of the car, but these programs allow charities without their own facilities or staff dedicated to automotive donation fund raising to benefit from vehicle donation programs.