Valuating a Car Donation Tax Deduction

Valuating the car donation tax deduction for a car that you wish to donate to a charitable organization is a complex process. All tax preparation software, such as Turbo Tax and TaxAct Online can ease this process for you when filing your tax return. There are a few tips and resources that you can use to help you understand how the process of how a vehicle donation works.

The first thing that you must understand is the type of charity that you are making the vehicle donation to. IRS Publication 78, Cumulative List of Organizations, is the list of all qualified organizations that the IRS recognizes for charitable tax deductions. This list is available online and is important to know. A charity that is not listed in Publication 78 may not be a recognized charity and your donation may be disqualified. Be sure to double check the charity before you donate because the list is updated yearly.

The guidelines for valuing a car donation tax deduction are found in IRS Publication 4303, A Donor’s Guide to Car Donations. The guide provides information about the deduction process and how to determine the amount of the donation. The amount that is permitted to be claimed as a charitable tax deduction for your car is based on the amount received in the sale of the vehicle.

Type of Charity

Another important aspect pertaining to vehicle donations and charitable contributions is whether or not the charity is a “50 percent” or “30 percent” charity. A simplified definition is that a 50 percent charity is one that limits the value of a charitable contribution to 50 percent of the donor’s adjusted gross income (AGI). A 30 percent charity limits the deductions value to 30 percent of AGI. This classification is also considered when valuing a car donation tax deduction.

Fair Market Value Determination

The IRS uses a fair market valuation to determine the sale amount of a car. This valuation is important because it establishes a minimum value for which the donor can claim as a deduction. The good thing about vehicle donations and other charitable contributions is that any amount that cannot be deducted in a given tax year can be carried forward for up to 5 years.

Additional Valuation Resources

There are several websites that can also assist in determining the value of a car donation tax deduction. These online calculators have you input information about the vehicle, make, model, year, miles and other factors necessary to determine the fair market value. The calculators can give you a good estimate of the value of your vehicle donation and the amount that may be deducted.

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