How to Donate a Car for Tax Purposes?

Question

Hi There, We are looking to donate an used car, we would like to know, how can we get the most value for our car? And also, if let's say I am supposed to pay $3k in taxes and the value of the car donated is $6k, will the other $3k be used towards paying taxes next year?

Answer 1

That is not how it works.

1)  Charitable contributions are a deduction and not a credit.  For example, a $6000 deduction saves you $1500 in taxes if you are in the 25% bracket.

2)  The changed the rules on car donations a while back.  The charity is supposed to let you know what they sell the car for.  That is the amount you can deduct.  Your $6000 car will net the charity much less at auction.

Answer 2

Wayne Z is correct.  The amount you can deduct won't be appraised value or blue book, but will be whatever the charity sells it for.  This rule change is for donations after 2004.  This rule applies to donations of cars, boats or airplanes.

The rules are a bit different if the organization sells the car for less than $500, or uses the car instead of selling it.

In any case, you'd get a deduction (only if you itemize), which means the allowable amount would be subtracted from your taxable income along with your other itemized deductions, not subtracted from your taxes.  If your deductions and exemptions exceed your income for the year, then you owe no tax and would get back anything withheld, but couldn't carry the excess over to the next year.