As with everything in life, there are some very good car donation charities and some bad ones. If you are thinking about donating a car you do not use anymore, it is a good idea to do some research before you hand over your car keys. Many charities use a car donation center to handle their car donations. Many of those companies are for profit institutions. They often keep much of the proceeds from the sale of donated cars for themselves and only send the charity a minimal amount. You can find out how much money the charity actually receives from the car donation center by contacting either the charity or the car donation center itself.

There are a few car donation centers that are not for profit. Generally, these centers share a larger portion of the revenue with the charity. In addition, these companies are scrutinized much more closely by the government, particularly by the IRS. They usually are required to have their financial statements audited annually.  For profit companies do not have to their books audited. If you are not sure whether a car donation center is for profit or not for profit, you can find out through the IRS at irs.gov.

Another factor in the car donation process is the type of car the donation center or charity will accept. Many will only accept a car for donation that is less than 10 years old, runs and needs virtually no repairs. Some will take the good, the bad and the ugly with very few questions asked. Others, are somewhere in between.

In addition, the amount of your tax deduction depends on what the charity does with your car donation. If you donate car that is in good condition and needs no repairs, some charities will use it themselves or give it to a person in need. In this situation, you can claim the fair market value of your car as your tax deduction as long as it does not exceed the amount you paid for the car. In this situation, you can claim the fair market value of your car as your tax deduction as long as it does not exceed the amount you paid for the car. There are very few charities in this category.  The reason is simple; there is too much liability involved in a charity giving a car to someone. Most car donations that are in good condition are sold at auction. In this case, the donor can claim the sale price of the car as their tax deduction or $500 whichever amount is greater.

If you donate car that falls into the bad or ugly category, almost all charities will sell it. If that is the case, you can claim as your tax deduction the amount the charity or center sells your car donation for or $500, whichever is more. As always, you should consult with a tax advisor for assistance with determining the amount you can claim for your tax deduction.

All car donation charities and car donation centers are not alike. There are many variables in their structure and their procedures. Before you donate your car, ask some questions and do some research to separate the good, the bad and the ugly!