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Donate your old car and save money on taxes

You'll get a bigger deducation if the charity uses your car rather than sells it. Either way, be sure to follow the rules and save the paperwork.

By MSN Money Partner Dec 16, 2011 6:01PM on MSN Money

This post is by Lynnette Khalfani-Cox of


Looking to make a smart financial move before the end of the year? Try donating a car you no longer want, need or use.


Donating a vehicle to charity may net you a hefty tax deduction. However, you need to meet certain requirements to qualify for the deduction.


If you're feeling philanthropic, start by deciding on an IRS-approved charity you'd like to benefit. Just remember that the charity you select must be an IRS-recognized 501(c)(3) for you to get a tax deduction.


Consult IRS Publication 4303, "A Donor's Guide to Vehicle Donations," as well as IRS Publication 78, which lists qualified charities. (Religious groups aren't listed, but they qualify as well.)


To go the extra mile, also check the Better Business Bureau's National Charity Report Index. It rates charities based on 20 different accountability standards.

Once you know a given nonprofit meets IRS qualifications, contact the charity to arrange the donation. Most will send someone to pick up a donated vehicle. Be sure to ask how the charity will use the car. Will it simply sell the car at an auction, as is commonly done? Or will the charity actually keep the car and use it -- say, to transport kids or senior citizens?


The distinction is important because the IRS has gotten stricter about deductions for donated cars.


For cars that will simply be sold for cash, you are allowed to deduct only the charity's sales price of the car--not the vehicle's market value. Your deduction is further limited by your marginal tax rate. For example, assume a charity sold a vehicle you donated for $3,000. If you were in the 28% tax bracket, your deduction would be capped at $840.


But you can deduct the full market value of vehicles that will be used by a charity for things like deliveries. So if you give away a car that will be used by the charity, and it has a fair market value of $5,000, your deduction will be $1,400, assuming a 28% tax bracket.


Regardless of how the car is to be used, be sure to get a receipt from the charity. If the charity sells your donated vehicle, it is required by law to send you a notice of the sale within 30 days advising you of the car's sales price.


Once you've donated the car, contact your auto insurance provider to drop the vehicle from your policy.


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Dec 20, 2011 1:07AM
thats a great idea......if you are wealthy most americans are so far in the red right now they will sell the car for cash right now if they can and pocket the money. or drive the car until it is nothing but junk . donating an item like that is out of reach for most but this is good article material or an idea for bank ceos and  high paid politicians   thanks for nothing.
Dec 31, 2013 5:38PM

Doing this a perfect way to receive a tax break since donating is a fast and simple way to help those in need while helping ourselves. I donated an old car to and it was great knowing I gave it to a charity that takes the car and actually gives it to someone who can really use it to change their lives and allow them to enable so many new possibilities that were limited due to a simple lack of transportation. They accept running and non-running vehicles to provide transportation and even financial aid. I know that they are non-profit and really use everything they get to help people. Anyone can go to and help.

Oct 4, 2012 10:15AM
This is very good idea to save your tax for donate your old car.i have heared about donation,but not exactly donate for car cash.There are large number of website where we can donate car with cash.One them is as below.
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