Did you know you can donate a car and save on taxes? Donating a car to charity can give you a substantial tax savings if done correctly. A little planning will assure that you maximize the tax savings of your car donation. The Internal Revenue Service (IRS) wants you to work out your deduction in one of two ways, depending on how the charity uses your donation. If the vehicle is going to be used by the charity or given to a third party through the works of the charity you can apply the car’s fair market value, which can result in a very large tax deduction. However the cars these nonprofits accept is limited and there are less that use this method. A good that we’ve partnered with is Good Neighbor Garage. The other method for calculating a tax deduction is used when charities sell the vehicle and use the proceeds to advance their cause. Deductions for cars the charity sells are limited to the sales price of the vehicle with a minimum value of $500. Anything below $500 is rounded up and you are able to deduct the full $500. So donate a car and save on taxes in 2015.