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If you have a junk car parked out front, you may find yourself having some difficulty deciding what to do with it. Fixing it up or trading it in are both technically options, but may fetch you very little money or cost you more in the long term.

Selling your car is also an option, but are you thinking about donating it instead? Donating your car to charity is a generous act that feels good and comes with tax benefits. However, it’s important to know what’s required to donate your car and the steps involved in claiming the tax deduction.

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Step 1: Finding a Charity

Step 1: Finding a Charity

Did you know that there are over 1.5 million non-profit charitable organizations in the United States alone? That sort of selection can make finding a charity to donate to in the first place feel overwhelming. Fortunately, there are guidelines you can use to decide where to donate your car in the most beneficial way possible.

That said, your search for a charity starts with what’s in your heart! Think about what causes are most important to you — and don’t worry about finding a charity that focuses on cars. Even for charities that don’t deal with vehicle donations directly, there are ways to donate the proceeds from your vehicle to their cause.

Once you’ve decided what issue you’d like your charity to focus on, find a few that seem promising. From here, you’ll need to do a bit of research. First, look at Publication 78, the “Cumulative List of Organizations” page on the IRS website. This page lists all businesses filed as 501(c)(3) charitable organizations.

If your charity isn’t on this list, your donation won’t count as a deduction and you should look to donate elsewhere.

Next, look into the charity’s business practice. Keep in mind you want the maximum amount of your donation to go to the cause you support. Look for organizations with administrative costs at or beneath 15%.

If the organization requires a third party intermediary to handle vehicle donations, make sure the charity keeps at least 60% of the donation proceeds (although closer to 75% would be ideal!) Towing costs should always be covered by the charity or intermediary.

You should also keep in mind that while donating your car to a family member or friend, any donation not given to a registered 501(c)(3) charity is not tax deductible. The recipient of your gift may also find themselves facing tax consequences as a result, so be sure to have a plan in mind for financing that penalty should the need arise.

Step 2: Donating Directly

Step 2: Donating Directly

Now that you have a charity picked out that supports a cause you’re passionate about, you’ll be ready to donate your car. Remove your plates, update your registration, and sign over the title in the name of the charity.

At this time, you’ll also need to get a valuation of your car. If it’s still in good running order, use a site like Kelley Blue Book. If not, compare your car to others like it on auction sites to get an approximate market value. In either case, date and save this documentation with your other tax records.

An unusual aspect of claiming your donation is that the quantity you claim is dependent on whether or not the charity sells your vehicle, so you’ll need to keep their contact information.

If your car is sold by the charity, your deduction will be for the sale price rather than the fair market price of the car. The only exception is if the car sells for under $500, in which case you may still claim a deduction of $500.

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Step 3: Claim Your Deduction

While a tax preparer will be best equipped to guide you through claiming your deductions, there are documents you’ll need to prepare or use when claiming this donation.

  • The dated valuation of your car you found and kept at the time you sold your car.
  • Form 1098-C, which can be received from the charity if your car sells. This form verifies how much your car sold for.
  • A form from the charity itemizing your donation and providing identifying information about the charity, you, and the date of your donation. You’ll need this regardless of how you donate or if your car sells.
  • A written appraisal of your car’s value, if its value is over $5,000.
  • Tax Form 1040 “Gifts to Charity” - this is the page where you’ll list your donation.
  • Tax Form 8285 - if your car was worth $501-$5K you’ll fill out section A. If your car was worth more than that, you’ll fill out section B.

Congratulations! You’ve done a good deed for others and done yourself a favor come tax season.

The Alternative: Selling to Donate

The Alternative: Selling to Donate

While donating your car directly to your charity of choice is a perfectly viable option, it certainly isn’t the only way to use your car to benefit a cause. Another way to donate your car (and reap the tax benefits) is to sell your car yourself and donate the proceeds to the charity as a cash donation.

This method avoids unnecessary intermediaries that profit off of your donation instead of the charity keeping it. It also allows you to claim the full value of your car as your deduction rather than the uncertainty of waiting to hear the sale price from the charity.

Selling your junk car yourself before donating may sound like a major undertaking, but it couldn’t be simpler. You can sell your car from the comfort of your home using DamagedCars.com! It takes just 90 seconds to get a quote.

DamagedCars will always give you the best price for your junk car, and can pick it up for free within 24-48 hours. Our offers come with free towing and title transfer, so you won’t have to pay anything to use our service. Once the tow truck driver arrives, you’ll receive payment in the form of a check.

You can cash the payment and donate what you received to the charity of your choice, allowing you to donate a greater amount that can be put to use immediately and simplifying the documentation required to claim your donation on your taxes!

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2/03/2021

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Is It Better To Donate A Car Or Junk It?

It depends on your goal. For instance, if you want to help a charity that specifically requests car donations to provide vehicles to people in need, then the best way to help them is to provide a vehicle.

However, if your goal is to provide monetary benefit — or even just to get rid of a car — then junking it is simpler, faster and more effective. You can get more money for your vehicle by junking it, which means you can make a greater donation and simplify your paperwork on your taxes.

DamagedCars can help you junk your car fast and for a fair price in just a couple of days. Get an offer — it takes just 90 seconds — and find out what your car is worth now.

How Much Tax Credit Do You Get For Donating A Car?

The tax credit you get for donating your vehicle depends on the value of your car and what the charity does with it. If the charity sells your vehicle for $500 or less to raise funds, you can claim up to $500. If it sells it for a higher price, you’ll need to get the exact dollar amount.

A simpler, easier way to donate to a charity is to sell your car yourself and make a cash donation. This allows you to deduct precisely the amount you donated, provides a more immediate benefit to the charity and makes the process faster and easier for everyone involved. DamagedCars can help you junk your car for a fair price without the fuss.

Is It Worth Donating A Car For Taxes?

That depends on many factors, but there are some things to note if you’re considering donating your car for the tax benefits:

  1. You will not be deducting the value of the car from the amount in taxes you owe; you will be deducting the value of the car from the total income counted in determining your taxes.

  2. The amount you can deduct depends on both the value of your vehicle and what the charity does with it.

  3. Managing the paperwork for a donated vehicle can be complicated.

Not interested in the fuss? Selling your car to an online car buyer like DamagedCars can help you simplify the process. We buy the car for its current market value, you get a check, you decide what to do with the check, whether that’s donating it to a charity or putting it in your own bank account.