How Do I Estimate the Value of My Donated Car for My Tax Deduction?
Deducting your car donation can save you a significant amount of income tax.
Donating your car to charity can be a good deal for both you and the organization you give it to. A charity may keep your vehicle for its own use, donate it to someone in need or sell it to obtain the cash. Deducting your car donation can save you a significant amount of income tax; however, the IRS increased the documentation requirements you must adhere to. To avoid having the IRS question your deduction, be sure to follow the guidelines and keep every document that proves your donation.
Step 1 - Find a qualified charity
The most important step in deducting the value of your car donation is to insure the charity you donate it to is an IRS tax-exempt organization. Only the donations you make to these types of organizations
allow you to claim the deduction. Generally, these include religious groups, charities and organizations that promote education, literacy, scientific or humanitarian causes.
Step 2 - Estimate the value of your car
Step 3 - Determine usage
Find out how the organization intends to use the car. If it's going to sell the car, the IRS limits your deduction to the sale price, even if it’s below the market value. However, if it sells for $500 or less, you can claim a deduction for the lesser of its fair market value or $500. If the organization plans to keep the car, then you can deduct the value you found in the used-car price guide. If that value is greater than $5,000 and the charity doesn’t sell the car, then the IRS requires you to obtain a written appraisal before claiming a deduction.
Step 4 - Acquire documentationSource: turbotax.intuit.com