IRS Deudctions

Car Donation Tax Deduction

A car donation tax deduction can be claimed when a car is donated to an eligible organization and proper proof of the car donation is obtained. The IRS has a few publications dedicated to explaining to taxpayers how to claim a car donation tax deduction.

Which IRS Publications Explain Car Donation Tax Deduction?

There are two main IRS publications that have information on car donations and how to claim tax deduction on them. They are:

  • Publication 4302, “A Charity’s Guide to Car Donations”
  • Publication 4303, “A Donor’s Guide to Car Donations”
car donation tax deduction

The IRS Publication 4302 is for charities and nonprofit organizations to read when they solicit for car donations. There are strict guideline to follow.

The IRS Publication 4303 is for anyone thinking of donating a vehicle.

Important Things To Know About Car Donation Tax Deduction

Many people want to donate cars and other properties to charities and get tax write offs in the mean time. What most people do not realize is that not all donations are tax deductible, even when they are for a good cause. Also, sometimes, the entire amount of donation is not fully tax deductible.

How to Take a Car Donation Tax Deduction?

Donate to a Qualified Charity

The first thing to do when you want to donate a car and take a car donation tax deduction for your donation is to ensure that the charity you want to donate to is a qualified charity. The IRS Publication 78, Cumulative List of Organizations, has an updated list of most charities that are qualified. Alternatively, you can call the IRS to verify.

Itemize on Schedule A

If you want to take a car donation tax deduction, you must itemize your tax deductions on Schedule A of the Tax Form 1040. You cannot claim the standard deduction and the car donation tax deduction at the same time.

Know the Limits

When taking the car donation tax deduction, you must take into account certain limitations, outlined in the IRS Publication 526 called Charitable Contributions. There are many limitations to charitable donations that you can deduct such as your deduction cannot exceed 50% of your adjusted gross income.

Value the Car

Most people want to take the most car donation tax deduction that they can. However, the IRS will only allow a fair market value deduction. This value may be smaller than the book value of the car.

Proof of Donation

Depending on the value of the car, you will need different types of proofs or acknowledgement from the organization that you donated to. Record keeping is very important because if the IRS decides to question you about your car donation tax deduction, you will need to provide the proof of your donation.