Car Donation – Why Donating Your Car To Charity May Be A Smart Financial Move

Some people donate their older cars to charity instead of trying to sell them. And this is a great idea, because it gives you a tax break, while still allowing you to get that old car off of your hands. 

But how do you get the maximum payout for donating a car to charity? 

Obviously, people donate cars to help out. But it is also perfectly reasonable for them to want an awesome tax break for doing so!

How do you get the best tax break possible for donating your car to charity? 

Let’s talk about it. 

The Tax Laws Changed In 2004

In 2004, the tax rules changed to make it more difficult to get a tax write-off for donating a car to charity. 

But just because it got more difficult doesn’t mean that it isn’t possible!

You can no-longer donate your car for a tax write-off at fair-market value straight across the board. But you can deduct nearly the full fair market value by donating a car under the correct circumstances. 

Make Sure That The Charity Is Legitimate

This is the number-one thing when donating a car to charity. You want to make sure that the charity is actually a charity, and not some sort of fly-by-night scam!

So make sure that you do your due diligence before handing over the keys. And make sure that you keep a record of the paperwork. 

Pro Tip: If the car is valued at more than $5,000, you must get an independent appraisal before you will be able to get the tax deduction! 

For Best Results, Donate A Car Under One Of These Circumstances

There are some situations where you will be able to deduct the full market value of your car donation. Here are the best scenarios for that…

  • If the charity plans to use the car in its day-to-day operations
  • If the charity improves the vehicle to either sell or use
  • If the charity goes on to sell or donate the car to a person in need for below market value

If your donation does not fall into the realm of one of these three situations, your deduction will not likely be the full market value of the car, but whatever the charity receives when they sell it. 

Make Sure To Keep Up With The Paperwork!

Take photos of your car, keep records of any and all maintenance/repairs done to it, file the proper IRS forms (probably Form 8283), and get a receipt from the charity organization, not only for the vehicle, but also for how much the vehicle was sold for. 

If the car was donated for them to use as a daily driver, then make sure you get a record of how often the charity plans to use the vehicle, and what its intended purposes for it are. 

Making sure that you keep all of this paperwork will save you a lot of trouble when the time comes to file for your tax deduction. It will also save you in the unlikely, yet ever-present event of an IRS audit. 

Non cash deductions are especially likely to get the attention of your friendly neighborhood IRS agent! 

Do Your Homework Before Donating Your Vehicle

There are a lot of reasons to donate your car to charity. And in many cases, doing so can actually pay off a lot better than trying to just sell the car… especially if the margins are going to be tight, and you are going to factor in the time and trouble. 

But at the end of the day, always do a quick number crunch to make sure that you’re making the right financial decision. 

Donating can sometimes pay off more than selling – you just need to know exactly what you’re doing!

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