How to Determine the Value of Your Car for Donation
The general rule is the maximum amount you can deduct on your income tax return is the fair market value of your car. The “fair market” value is considered the price that a buyer would pay and a willing seller would accept for the car, when neither party is compelled to sell or buy, and both parties have a reasonable knowledge of all the facts of the car.
Some charities mistakely claimed that their donors can deduct the full value of their car donationsat the value found in a used car guide (e.g. Kelly Blue Book). However this is true. A used care valuation guide might be a good starting point to value your car, however the IRS only allows a tax deduction for the fair market value of your car, which might be substantially less than the used car valuation guide.
You donate your car to the local church. You check the Kelly Blue Book and find that your car is worth $2,000. However, your car needs extensive repairs, and after some research, you find that you could only sell the car for $800. Therefore, your charitable contribution deduction may not exceed $800, the fair market value of the car.
- IRS Publication 561, Determing the Value of Donated Property - Information on determining the value of your car
- IRS Publication 526, Charitable Contributions
Before you donate your car to a charitable organization for a tax deduction, please read the following articles on this site: