Many potential car donors have questions about their eligibility for a car donation tax deduction. The good news is that when you give to a legitimate non-profit organization essentially all car donations qualify for some form of tax write-off. The size of your tax deduction will be determined by two factors: the value of your car and how your charity of choice uses it.

The great thing about donating a car is that a tax deduction donations offers benefits to both the donor and the recipients. Of course donors will have to do some work to claim the appropriate tax deduction. The easiest car donation tax deduction to claim are those involving cars with a value of less than $500 because the value does not have to be substantiated and is not reliant on how the car is used. A tax deduction of more than $500 is subject to more specific terms. How your car donation is used will determine whether you are eligible for a tax deduction of full market value or whether you will be claiming the gross sales amount.

When your vehicle donation goes into direct use (for example, by a family in need or by the charity itself) then you are eligible for a tax deduction of full market value. If on the other hand your car is resold to raise funds for other charitable efforts then you are only able to claim the amount that your car is sold for (this is called the "gross sales proceeds"). In any instance where you plan to claim a deduction of more than $500 you will be required to substantiate that claim with a receipt from the charity to which you donate.

While it sounds complicated, the government has made claiming a car donation tax deduction easier by introducing a special tax form that outlines all of the necessary terms and requirements.