A car donation tax deduction is a great way to make some money off of an old car that you cannot be bothered to sell to a car dealer or on a site like craigslist.  Typically, you donate your car to a non-profit charity and in return, you can deduct the value of the car from your taxable income.  You can search online to find any number of charities that will be clamoring for your donation.

The way you get a tax deduction through donating your car is simple.  First, you must have a vehicle that you no longer want and that you do not want to sell or are unable to sell.  In some cases, the car does not even need to be running!  Then, you can search around for a charity or non-profit that accepts cars as donations.  It's a good idea to gift them a call first to verify that they will be willing to accept your type of car, and be sure to mention it's condition, especially if it has major problems that you know about or if it is not drivable.  Assuming the charity is willing to accept it, you can then give them your auto. Usually you should drive it over to the charity's office but in some cases they may be willing to pick up your car or even tow it!  Then, be sure that the charity gives you a receipt for the value of your donated car - you will need this donation receipt in order to claim the value of the car as a donation on your taxes. 

Though it's not as simple as getting cash for your car, the way a car donation affects your taxes is simple.  In most cases, the value of your donated vehicle is deducted from your taxable income.  For example, let's say that you make $20,000 last year in salary.  If you donate a car worth $2,000 then your taxable income will be down to $18,000.  This means that you will owe less taxes and keep more money in your pocket!

Though the car donation tax deduction is popular, it may not necessarily be the best way to get the most value out of your car.  Particularly if it's a nice car in good condition that runs, you should look into selling it to a dealer.  You can also try listing on a classified ads website like craigslist where there is no cost to post a listing.  In most cases, selling your vehicle will not only make more money than donating it, but you will get cash now instead of paying less taxes when tax time comes around which might be as much as a year from now.

If you can't sell your car or it will cost more than the value of the car to make it run, donating it can be a good decision.  In fact, it can sometimes *cost* you money to dispose of a car that does not run which sure is less appealing than a tax deduction for your car.

Car donation tax deductions can be controversial because in most cases, the charity will not be able to sell your car for nearly as much as you claim it to be worth.  Therefore, you are getting a great deal because of the artificially high valuation of the car that you are claiming on your taxes.  This means that you should not artificially boost the value of your car because this can put you at risk of being audited on your taxes which will certainly be a huge pain.