Is A Car Donation Tax Deductible?

You’ve got an unused vehicle in your driveway. While you’ve explored plenty of options to free up space, the idea of making a difference in the community via a car donation feels like the best way to go. Of course, earning a tax deduction and avoiding the hassle of trying to sell that car are nice perks as well.

Whether you’ve explored a car donation in the past or are investigating it for the first time, you have questions. Luckily, a car donation isn’t as complicated as it might sound. Here are some of the most frequently asked questions that help you determine if donating your car is worth it for you.

Where Should I Donate My Car?

There are plenty of organizations out there that will gladly accept your used car. You want to check two things: 1) you’ll qualify for a tax deduction, and 2). you support the organization.

Earn a Tax Deduction

To ensure that you can actually claim your car donation as a tax deduction, you need to work with a 501(c)(3) non-profit organization. Finding out if an organization fits under this category is usually pretty straightforward. You can certainly donate your car to a business or other kind of organization, but you won’t get the benefit of the tax deduction.

Also, make sure that the recipient of your tax donation also provides you with the appropriate receipts and paperwork. You’ll need these come tax time.

Choose An Organization You Support

You get to choose what kind of charity or organization you want to support. More importantly, you want to ensure that your donation actually goes towards helping the mission. Sadly, there are non-profits out there that funnel more money towards their leaders and staff than to the communities, people, and causes they serve.

How Does It Work?

There are various ways your car donation can be put to use. Some organizations actually need transportation options, so they’ll use your car to transport people or goods. Other organizations will sell your car. The proceeds are then put back into the non-profit to help with their operations or mission.

While these two methods seem pretty simple, there are some more innovative organizations out there. For example, there are schools that serve at-risk adults through auto mechanic training. They accept car donations to use in the classroom. Students repair and upgrade these vehicles as part of their training. The cars are then sold, and the money goes back into the program.

What Do I Claim On My Taxes?

The kind of organization that takes your donation and how they use it will help determine how you make your tax deduction. If the organization accepts your car and uses it as is, donates it to someone else in need, etc., you can deduct the fair market value of the vehicle. This value is typically determined by looking at what the car would sell for in your area. You can often supply information about your car to trusted sites like Kelly Blue Book to get an estimated value.

If the organization sells the vehicle, you can claim the final sale price. This method is a little more straightforward but requires waiting until the sale is made.

Work with your chosen organization to determine how they’ll use the donation. They should also be able to help you understand how you’ll claim the deduction on your taxes. In many cases, a tax deduction is better than selling the car for cash. It can mean lowering your adjusted gross income, which can put you in a lower tax bracket or even increase your refund. If you have any concerns or questions, make sure to work with your tax professional.

Give Your Old Car New Life

Instead of letting that unused car take up space in your garage or driveway, consider turning it into a car donation. Not only can you help a program’s transportation situation, provide valuable experience for students, or bolster an organization’s funding, you can earn a solid tax deduction for yourself. It’s not every day you can feel great about helping your community and save on your taxes at the same time.