Car Donation Tax Deductions

 There are many non-profit charities that accept car donations. Some vehicles are broken down for parts, while some are used as part of "bikes to work"? program that provides transportation to help people get to work. Other non-profit organizations will sell your donated car and use the proceeds from the sale of your vehicle to fund important training and employment programs for people with disabilities and other disadvantages that prevent them from succeeding in the workplace.

In the past, you could donate a vehicle and get a tax credit for the fair market value of the vehicle you donated. A new law that came into effect on January 1, 2005 changed the tax deduction process to make it more difficult to claim the full value of your donated vehicle. Today, the new law says that you will only be able to deduct the proceeds that the charity receives from the sale of the car, after deducting the cost of necessary repairs. The charity must provide the donor with written receipt of the vehicle and the sale price of the vehicle. This could be problematic because the sale price of the car will be significantly less than the actual market value of the vehicle. Charities do not approve of this new law as it will discourage many potential donors and thereby harm the charity. However, potential donors should not be deterred if the charity is their favorite non-profit and they know that they are really helping people get back on their feet. A tax deduction is nothing compared to helping someone in need.

The only way to deduct the full fair market value of your vehicle is if the charity does not sell your donated vehicle. Is it a charity using your vehicle for a program like? Bikes to work? and confirms your donation in writing, you can claim the full market value.