Full Fair Market Value Deduction
If at all possible, avoid the for-profit intermediary organizations that advertise so pervasively to handle your car donations. When you work with one of these organizations, they keep the vast majority of the dollars created from your donation. Even the most reputable of the agencies that handle these transactions keep nearly 50% of the car's value for their troubles (other, less scrupulous entities keep 90%, or even more). If you can find a charity that handles the transaction themselves, they can keep 100% of their profits. It's possible that the charities you already support have a car-donation program that you don't know about. Check with them first.
When you donate car for charity, you are not only helping a worthwhile charity, but it can also be beneficial to the person donating a car. The charity benefits by selling the old car at an auction and using the proceeds it receives from the sale to support its charity efforts. The person donating vehicle to charity not only gets the satisfaction of knowing they’ve helped a worthwhile cause, but can also receive a tax break for their charitable contribution.
The Tax Law has numerous methods by which donated vehicles can be valued, depending the situation. There is even a potential for a donor to receive a cash payment from a charity by means of an IRS allowed “bargain sale” rule. As well, vehicles with values in excess of five thousand dollars ($5000.00) can be appraised to determine your tax deduction. Further, a “fair market” value based on a vehicle index such as the Kelly Blue Book is now possible under many scenarios, such as the “material improvement” rule. Finally, in a majority of cases a donated vehicles value will fall under the “gross sales value” rule.
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