The Benefits of Donating a Vehicle

Some taxpayers donate a vehicle that they no longer want. In the older days, a taxpayer was able to get the Kelly Blue Book value of that vehicle and walk away with a tax break worth the same fair market value (as stated in the Kelly Blue Book). That is not the case anymore, thanks to "greedy" people who claimed the value of their donated cars at a higher values than what they were really worth.

To donate a vehicle today, there are steps that must meet approval in order to claim the tax deduction for the donation. Lawmakers have tightened down on how much a taxpayer can write off for a vehicle donation because of taxpayers who abused the credit in previous years. Now, donating a vehicle depends on the donor's claimed value of the donated car (based on the Kelly Blue Book retail value) and the charity's use of the vehicle (if the vehicle is in running order and can be used to provide transportation for charitable reasons or if the charity sold the vehicle for profit only).

Now, taxpayers who donate a vehicle have a $500.00 vehicular donation limit. This applies to not only vehicles but to boats, campers, even airplanes that are donated. However, there are a few exceptions with the $500 limit and in some cases, the donation can be claimed at fair market value if the charity uses the car to deliver foods or clothing on charitable runs (before the charity sold the vehicle). The taxpayer would need to get verification that the donor vehicle was indeed used and later sold for profits. Once this has been done, then the taxpayer can claim the full book value of the vehicle donation. If the vehicle donated was only sold for a profit and not used for charitable work, then the limit is only a $500 tax deduction.

Another way that a taxpayer can get the fair market value of the donated vehicle is if that charity made repairs and fixed the vehicle for charity work. When this happens, get the proof that the vehicle indeed was fixed up and is being used for charitable work. The IRS will then give the tax help of the full market value that the car was worth. It is not worth it to cheat the IRS when donating vehicles to get a higher refund back as the IRS will catch up to the misdeed sooner or later.