Everybody knows that if you donate a car to a charitable (non-profit) organization you can list it as a deduction on your taxes. What you may not know is that the rules have changed in recent years, making it more difficult to claim the value of such a contribution. And yet, if your old clunker is slated for the junk heap anyway, you might as well do something good for your fellow man and get some kind of tax break in exchange. Plus, there are other benefits to this type of beneficence. Here are just a couple of ways that donating a car can be to your advantage.
But let's get on to the real benefits that everyone wants to know about; helping other people and feeling good about it may be high on your priority list, but let's face it, so are your finances. And as long as you're doing something nice you may as well get something out of the deal. So here's the skinny on the tax situation. It used to be the case that you could donate a vehicle to the charitable institution of your choice, get a receipt (for your own records), and claim the fair market value of the vehicle on your tax return for the year, deducting the entire amount as a loss.
Sounds pretty awesome, right? It was, right up until a whole bunch of people got caught taking advantage of this good faith system by claiming that the cars they donated were worth a lot more than their actual value. It turns out the IRS does not like to be defrauded in this manner. Not surprisingly, they changed the rules and regulations pertaining to this particular deductible.