Tax Deductible Car Donations

If you have an old clunker of a car taking up space in your driveway or taking all the joy out of driving, then there are things you can do to get rid of it.  You can always sell it or trade it in, (which will get you almost nothing for it) or you can donate it to a charity.  Many charities have car donation programs that take old cars and then auction them off to the public.  The money made from the sale of the car goes to help that particular charity continue to operate.

Now if donating your old car out of the goodness of your heart isn't enough of a reward for you, there are other benefits to doing this.  While you won't get any money directly from donating your car, you can deduct it from your taxes at the end of the year.  After your car is sold by the charity, they will send you a receipt for the amount of money it brought in.  You can then deduct that money from your taxes.  There are also special cases where the car sells for less than $500 that allow you to deduct the actual value of the vehicle.  This will be explained later on.

How to Donate

If you have finally decided to part ways with your old pile of junk and donate it to a charity, there are just a few things you have to do.  First you need to contact the charity to make sure they do take old cars.  If they do, great!  Most charities hire processing companies to take handle the whole process.  One of these companies will contact you to make arrangements for picking up the car.  That's right, you don't even have to take the car anywhere.  They will send a truck out to get your car from where you live.  You don't even have to be there when they come get it.  You just need to leave the keys and the title with the car.  Once they drive off with your old junker, it is no longer your responsibility.  Just make sure you pay those overdue parking tickets.

After your car is hauled away, it is taken to the processor's shop to be inspected.  If the car is found to be in decent working condition, then it may be tuned up a bit before it is put up for auction.  If a car is in such bad shape that is is deemed to be unsafe for daily driving, then it will be scrapped for parts.  Most car processors will do everything they can to keep a car in one piece to be sold since taking it apart for parts usually take more time and costs more money.  This also means you will be able to write off a bigger amount on your taxes if it can be sold as is.

Breaking Down the Numbers

Now that you know the basics of car donation, let's get down to the details.  If your car is worth more $1,000 or more, then you have a few choices with what to do with it.

One option is to sell the car privately.  You can sell it for it's full market value and it is the best way to get the most money for your car.  It might be the hardest choice, but you can get help by posting your car on sites like Autotrader and eBay. 

The second thing you can do is trade in your car for a new one.  The problem is that you almost never get a good deal on a trade in, especially an older car.  You will usually get far less for your trade than you would be selling it.  The benefit, however, is that you don't have to go through the process of selling your car and all that comes with it.  You simply hand over the keys and the car becomes the dealer's responsibility.  If you can deal with only getting a few hundred dollars on the car, then this is a much easier way to do things.

The third option for unloading your car is to donate it to an organization that specializes in taking old cars as donations.  If you do this, you can deduct the car's true market value from your taxes.  If you are in the 33 percent tax bracket, then a $1,000 car means you will get $333 dollars back at tax refund time.

Your fourth car removal option is the one we briefly discussed above.  This is donating it to a charity that is willing to take your bucket of bolts.  You will get the letter stating the amount it was sold for, which will be much lower than its market value.  However, if your car is sold for less than $500 when it is actually worth more, you can get a note from the charity that says you can claim $500 or what the car is worth, whichever amount is lower.  To get all the details straight, you should check with the IRS and their policies for deducting the amounts for donated cars.  They will tell you what the heck to do. 

Now that you know a little more about what is involved with donating a car, you can go ahead and do it.  Old beater cars can serve their purpose, but there comes a point in the life of every car that they are just taking up space and costing you money on insurance and gas.  At this point, you have to decide if keeping your car is really worth it anymore.  Rather than just dumping your car in the river, you can donate it to charity where it will help out those that need it.  A person in need of transportation can buy your car for cheap at an auction.  That money will then go to the charity to help them pay their operating expenses, which means that it can stay open to keep helping those in need.  By donating a car, you can get a little money and feel good that you did something to help others.