A Look at the Tax Implications of Car Donations

Donating a car to charity can lighten the financial load on your chest. The IRS, however, takes note of such actions and tries to determine your potential tax liabilities for doing so. Fortunately, there are ways to reconcile your issues with the IRS after you let go of the vehicle.

A reputable car donation service has a list of charities they work with when processing donated vehicles. You are free to do research on your potential beneficiaries’ particulars, but the key indicator should be their inclusion in the IRS’ annual Cumulative List of Organizations as a Section 501 (c) (3) charitable entity.

The size of the deduction may depend on the written acknowledgement that the beneficiary charity furnishes you. The document must contain your name and taxpayer ID, the vehicle identification number, and either: a statement denoting that no goods or services were made in return; a good-faith estimate for anything provided in return; or a testament that any benefits from the recipient were religious in nature. All of the above must be detailed to help the IRS deduct at least $500 off your tax listing.

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