WARNING: This information is not intended to be legal tax advice. These laws are subject to change at any moment.
Contact a tax advisor or the IRS for more information if you aren't sure of something.
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Car Donation Tax Deductions
You used to be able to write off the fair market value of a car that you donated to charity. Times were good. Lots of people happily donated their cars and got a decent tax deduction.
Unfortunately too many people were taking advantage of this by exaggerating the value of their car and the IRS didn't like losing that much money.
Now you can only claim the amount that the charity sold the vehicle for (if they sell it).
Unfortunately many of these cars are sold at auctions for pennies on the dollar. There is a provision that says you can write off up to $500 as long as the vehicle is worth more than that, even if they sell it for less.
If your $2000 car sells for $300 at an auction, you can only write off $500, which means you still lose a lot of money.
While this is good for the people buying the cars, it is not good for vehicle donors from a financial standpoint.
If however the charity uses it or gives it to someone in need then you can in fact write off the fair value.
That can make a difference of saving $60 worth of taxes or $700+, so exploring the options is worth the effort.
One alternative is to sell the car yourself and donate the money to your favorite charity instead.
On the other hand, if you don't have time to sell it yourself, are just trying to get rid of the car, or don't care if the charity gets $2000 or $300 from it, then by all means donate it.
There are dozens of charities that will happily show up at your house and pick up the vehicle as long as it meets their requirements.
If you are just trying to offload a broken car that is missing an engine, doesn't run, or is otherwise worthless, most places won't take it.
- For more information about car donation tax deductions check out this article.
- Or the IRS publication for car donors (PDF file). This is highly recommended as this information is straight from the government and is an easy read.
- The IRS Charity Search will help you validate that a charity is actually registered, but unfortunately doesn't provide any other details.