How Do I Put a Value on My Car Donation?

The IRS has revised the rules for taking a deduction for those who donate a car or other vehicle to charity. Car and other vehicle donations to charities have become quite popular in the last few years, and the IRS decided that they should clarify the process of deducting of the value of donations.

As of January 1, 2005, if the value of the donated vehicle is over $500 and the item is sold by the charity or its agent, the deduction the taxpayer may take is limited to the amount of money the charity actually receives from selling the vehicle.

The charitable organization also must provide the donor with an letter of sale within 30 days of completing the sale, and state the actual amount they received.

For example, you donate a car to charity, and the value of that car is $5,000. The charity sells the car without significant use or improvement, for $2,500. Your deduction is thereby limited to $2,500.

Here are a few helpful hints:

1. Clean the Car
Any car will sell better and for more if its clean. The car charity will probably hire someone to clean the car if its not clean and that cost will be deducted from the actual value of the vehicle.

2. Make Minor Repairs
Dont pour a bunch of money into the vehicle your going to donate, but if little things are in need of repair, fix them. Changing tail light bulbs or gluing the rear view mirror back on wont cost you much to do but will reduct the value of your tax deduction if you dont make the repairs yourself.

3. Research
Unless you want to donate only to one specific charity, you should research the various charities and see if there are costs or fees associated with the sale of the vehicle. Some charities use an outside company to sell thier donated vehicles and those companies usually charge a commission on every sale, which gets applied against the value of your vehicle and lowers your tax deduction.

4. What about Classic Cars and Collector´s Cars?
When donating a custom, collector car, the rule of thumb as far as the IRS is concerned, is still the same as any other car. Obviously, the market for collector´s cars is smaller than for everyday cars. Only a small segment of the population understands and appreciates the value of a classic car, and might be willing to pay you what you think it´s worth. But others would not. So these vehicles can be harder to get the appropriate value for.

  Other Websites of Interest
  Car Donation Programs - About Automobile Donation Programs
  Car Charity Donation - About Car Charity and other charitible donations
  Lincoln vs Cadillac Forums - Online resource for Lincoln and Cadillac Automobile Owners
  Mopar Forum - Own a Mopar Automobile? You may want to visit this free resource.
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