Deductible Car Donations

• Before considering the amount of your deduction, you must ensure the organization you donate the junk car to is eligible to receive tax deductible donations. Generally, organizations qualify to receive your deductible car donation only when it receives tax-exempt status from the IRS. Tax-exempt status is only given to organizations that operate solely to promote a charitable cause. However, although religious organizations don't receive official tax-exempt status from the federal government, they too are able to receive tax deductible donations.
  
  

Amount of Deduction

• For purposes of the charitable deduction, the IRS treats cars a little differently than other types of donations. Generally, your deduction will equal the lesser of the fair market value of the car or the price the charity sells it for. Because it's more likely a charity will sell the junk car for its parts, your deduction in most cases will be lower than the fair market value you estimate with a used-car price guide. After the charity sells your junk car, the organization will send you a Form 1098-C to report the price it sold for. However, if the charity sells the car for $500 or less, then you can choose to deduct the lesser of $500 or the car's fair market value, even if it results in a higher deduction. When you assess the car's fair market value, the IRS strongly suggests that you reference a reputable used-car price guide. Additionally, the guide must provide various values for a car's make, model, mileage and overall condition.
  
  

Necessary Paperwork

• Before you can claim a deduction for your car donation, you must obtain a written acknowledgment from the charity as proof of your donation. At a minimum, the document must include your name, Social Security number, the vehicle identification number, the date of your donation and a statement providing details on any property or services you receive in the exchange. If you don't receive anything, the statement must say so. But if you do, you must reduce your deduction by its value.
  
  

Taking the Deduction

• The charitable contribution deduction is only available if you elect to itemize deductions and forgo the standard deduction. Making this decision requires you to evaluate whether your total expenses eligible to be itemized -- including your junk car donation -- exceed the standard deduction for your filing status. If you decide to itemize, you must report your car donation on a Schedule A attachment to your Form 1040.