Before dropping off an old, high-mileage beater with the United Ex-Child Stars of America, or other assumed non-profit group, and expecting a fat tax deduction from the government to be forthcoming, the IRS advises car owners to heed a few bits of advice.
1. Make sure the organization is designated a 501(c)(3) public charity to ensure the donation will be deductible. Donating to Ed Smith's Foundation for the Help of Ex-Accordian Players is fine, as long as they agree to let you see their paperwork.
2. To claim a deduction, you must itemize deductions on your federal tax return. Closing your eyes and throwing a dart at the standard-deductions page on your tax instructions booklet is a sure-fire way to get audited. Also, certain limitations on charitable contribution deductions exist. Check with a tax advisor or the IRS for assistance.
3. Be honest in deterMining the value of your car. The back seat of that 1984 Dodge Omni of yours with 175 grand on the clock may hold sentimental value to you (spare us the details), but don't assume it will to the IRS. Only the fair market value can be deducted, not the highest number you can find on Kelley Blue Book. If the fair market value exceeds $5,000, you must have a written appraisal.
4. Documentation, Johnny! Make sure the charity you donate to provides all necessary tax receipts. A forged letter on your boss's stationery won't be enough to keep those serious-looking guys in slate-gray sedans from visiting your house.
For more information, see Cars4charities.org.