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Step 1
EVALUATE THE FAIR MARKET VALUE FOR THE CAR YOU ARE DONATING - Due to tax laws passed in 2005, it is vital that you know what the "Fair Market Value" is for the car you donate. This will determine your next plan of action to maximize money making potential. When donating a car, find the Fair Market Value on the Kelley Blue Book website (see link in resource section). You will need basic information on the car such as Year, Make, Model, Mileage, etc. See resources for further information.
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Step 2
LEARN HOW THE TAX LAWS AFFECT YOU - Donating cars for maximum money making potential requires a thorough knowledge of the tax law. The car you wish to donate will fall in two categories: Fair Market Value under $500, or Fair Market Value over $500.
If your car is valued at $500 or under, you will use the Fair Market Value to get your deduction.
If your car has a Fair Market Value of over $500 it gets more complicated and you have several choices. 1) Donate your car to a charitable organization that will sell your car and use the money they make for the charity. **In this circumstance you will be able to use whatever price they sell it for as your deduction. If your car is worth $700 Fair Market Value and they sell it at an auction for $300 Fair Market Value, you use the price they sold it. 2) Donate your car to a charity that will use the car before selling it or who uses the car as part of the charity business. **In this circumstance you will be able use the full Fair Market Value for your deduction.
LEARN HOW THE TAX LAWS AFFECT YOU - Donating cars for maximum money making potential requires a thorough knowledge of the tax law. The car you wish to donate will fall in two categories: Fair Market Value under $500, or Fair Market Value over $500.
If your car is valued at $500 or under, you will use the Fair Market Value to get your deduction.
If your car has a Fair Market Value of over $500 it gets more complicated and you have several choices. 1) Donate your car to a charitable organization that will sell your car and use the money they make for the charity. **In this circumstance you will be able to use whatever price they sell it for as your deduction. If your car is worth $700 Fair Market Value and they sell it at an auction for $300 Fair Market Value, you use the price they sold it. 2) Donate your car to a charity that will use the car before selling it or who uses the car as part of the charity business. **In this circumstance you will be able use the full Fair Market Value for your deduction. -
Step 3
DO THE MATH - By looking at your tax bracket and Fair Market Value of the car and the tax laws, determine how much money you will make by donating a car at each option which applies to you. You will want to consider also the value to the organization you are donating a car to. If you really want to donate to Autism Cares, but they are an organization which will only sell the car for income, is it still worth it to donate the car to them or would you rather donate to an organization which will use the car for higher money making potential?
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Step 4
CONSIDER SELLING THE CAR AND DONATING MONEY AFTER FOR MAXIMUM MONEY MAKING POTENTIAL - Donating a car is much more convenient than going through the hassle of selling it on your own. However, if you are truly worried about money making potential and you have a car at Fair Market Value over $500, you may want to consider selling your car on your own.
If this is an option for you, you will still be able to donate part of the earnings to your donation of choice and use it as a deduction, but you will also have money left over just for you.
