Potential Problems with Car Donation Deductions

When considering car donation deductions it is important to understand the rules of the tax deduction in relation to your car donation in order to limit your tax liability which may increase once you participate in car donation deductions.
Even though it seems the rules are getting stricter for car donation deductions for the donors, the rules are quite strict for the charities as well. The charitable organization is required to provide documentation on how the car donation ill be used as well as how much the car actually sold for.
The charitable organization for the car donation deduction must provide details on your car donation within 30 days of the donation of the vehicle.
One problem with the car donation deduction process now is that if the charity actually sells the vehicle for much less that fair market value, then you may not deduct any more than that amount.
The lesser amount of the price is usually the going amount as in auctions where it is either $500 or the lesser amount if sold for less.
It is important to visit the IRS website or one of our featured listings for more information.
Another problem that can be associated with car donation deductions is the charity’s actual 501 c 3 status. Are they even eligible to receive your donation? If not you may want to reconsider where you send your car donation off to.
The charitable organization should provide you with a statement regarding their eligibility as well as their identifying information. You can also look into this on your own at the IRS website or any place where you can find the publication 78 which lists all the eligible car donation charitable organizations.
Another problem that may occur with a car donation deduction would be in regards to how MUCH you are actually allowed to deduct on your taxes. Is it more than half of your adjusted gross income?
If you are in a higher level of income, the amount that is deducted from a car donation deduction may not have as much of an impact that that of a lower income household and therefore may not have that much significance in regards to deductions. In other words, is it really worth it to donate a car and go through all of the important details versus selling it yourself?
In many cases, most individuals just want to get rid of the car or other type of vehicle and have someone else tow it away and sell it for them. In this case, a car donation deduction would be a much more pleasant route.