How to Donate Your Car to Charity and Get Maximum Tax Benefits

Last Updated on December 26, 2020

Are you ready to donate your car to charity? If so, good for you! Donating a car to charity is a great decision on many levels. First, your donation is being used for a great cause. In addition, you can take your old or junk car out of your territory for free. You are also recycling an old vehicle, and you also get to claim the car donation as a tax deduction.

In this article, you will find some tips on how to donate your car to charity and get maximum tax deduction benefit, as well as some of the specific requirements you should be aware of regarding car donation to charity.

1. To donate a car to charity, you must first complete an online car donation form or call the charity to which you wish to donate your car. If you want to claim a car donation as a tax deduction, make sure the charity is an IRS-recognized nonprofit organization.

2. The process for receiving the tax receipt for your charitable donation may vary. Some charities will email you the initial receipt while others have the tow truck provide you with the receipt at the time of pick up. This is just an initial receipt and enables you to claim a tax deduction of up to $500. You should check with the charity to find out what their procedure is for providing you with this receipt when you submit your vehicle donation.

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3. Filing a Release of Liability with the State Department of Motor Vehicles is an important step you do not want to miss when you donate a car.  This document releases you from future liability which may arise for any reason after the vehicle is donated.

4. If your vehicle sells for more than $500, or if it qualifies for a fair market value tax deduction, you will receive additional tax paperwork after the sale of the vehicle takes place. The amount you will be allowed to deduct on your taxes will vary depending on several factors which could include the price the vehicle is sold for or whether the vehicle is classified as a fair market value car donation.

5. One last point to mention, if you plan to claim your car donation tax deduction on your 2020 taxes, you need to make sure you donate the car well before the deadline of December 31, 2020. The charity should have possession of the vehicle before midnight on December 31st, or at least have the pickup well in the works, in order for you to claim your tax deduction in 2020. Don’t wait till the last minute as there could be delays that could result in you being unable to claim the donation as a deduction for the current tax year.

If you have further questions related to your car donation tax deduction, most charities are relatively knowledgeable about the process and paperwork needed, however, you should consult a CPA or accountant for specifics regarding your particular tax situation.