Car donation is the practice of giving away unwanted automobiles to charity organizations. In the United States, charitable donations provide a tax benefit; as such, this type of giving has become very popular. For values less than $500, the value of the tax deduction comes from the donor's own estimate of the car's value, even if the charity receives less money from actually selling the car. Deductions for donations over this amount are limited to the sale amount of the vehicle (usually at auction). Some critics have claimed that this is essentially a tax shelter. However, non-profit organizations in the US have come to rely increasingly upon the revenue from car donations. This type of donation has become increasingly widespread in the U.S.; in 2000, 733,000 taxpayers reduced their taxes by $654 million.
Many charities run donation programs. Some have their own car lots which sell the donated cars but many have their donations processed through auto auction companies. Many processing companies also collect and sell donated cars and distribute the money to a charity the donor indicates. The processing company typically takes a percentage of the sale value of the car, but these programs allow charities without their own facilities or staff dedicated to automotive donation fund raising to benefit from vehicle donation programs.
Although advertised as an easy way to dispose of an old car, donors need to fulfill certain post-donation requirements to qualify for the tax deduction such as obtaining a written acknowledgment of the car's subsequent sale by the charity, and itemizing instead of taking the standard deduction. Ideally, donors should also investigate how much money from the sale of the car goes to the auction processor and how much actually benefits the charity's programs, as opposed to its administrative overhead.