Man holding car keys.
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Donating your used car to charity may bring you the joy of helping others in need, especially while new and used car prices remain high.
However, experts say don’t expect the move to have a huge impact on your taxes.
That’s because charitable contributions are itemized as an itemized deduction on Schedule A—and most taxpayers don’t itemize.
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Tommy Lucas, a certified financial planner and registered agent at Moisand Fitzgerald Tamayo, said “before you even talk about charitable giving, it doesn’t even make sense,” and a married couple’s itemized deductions must exceed $27,700. USD – Their 2023 IRS standard deduction. In Orlando, Florida.
These may include charitable donations, real estate taxes, mortgage interest, medical expenses exceeding 7.5% of adjusted gross income, and other qualified expenses.
“The average American doesn’t spend more than $30,000 on these items,” Lucas said.
How much a donated car is worth on your taxes
When you donate a car, your tax deduction This is usually the price at which the charity sells it; however, you can claim the car’s fair market value in certain circumstances, such as when a charity uses the vehicle for its own purposes.
“If you donate a car worth $2,000 and the charity auctions it off and it’s worth $1,500, you can only claim an itemized charitable contribution of $1,500,” he said.
Additionally, non-cash charitable contributions are valued at Limited to 50% He said it could be a “real hassle” if you were donating a newer used car that “is now valuable”.
How to claim a car donation at tax time
If you donate a used car worth more than $5,000, IRS Rules Requirements Albert J. Campo, a certified public accountant and founding partner of AJC Accounting Services in Manalapan, N.J., said the company provides a written appraisal of the vehicle. The paperwork may incur additional service charges, he said.
After a donation is made, the charity must file a Form 1098-C with the IRS, which is a written confirmation that they received the car, what the fair market value is and what they sold the car for, Lucas said. They will provide a copy to the donor.
Donors must include a 1098-C when filing their personal tax return and detail the donation on Schedule A.
If your non-cash charitable donation exceeds $5,000, you also need to fill out Form 8283, Lucas said.
“Take cash and donate”
On the other hand, a taxpayer can always sell the vehicle and give some or all of the proceeds to a charitable donation.
“You could easily sell it, take the cash and donate it. It would be easier,” Lucas said.
This may mean you get greater value for your donation, as a private sale may fetch more than the car would fetch at auction. In addition, he said that for cash donations, the deduction is capped at up to 60% of annual gross income.
Even if you don’t see a tax benefit, you can relieve the charity of the effort and expense of repairing and selling the car.
How to Vet a Nonprofit Car Donation
If you plan to donate a car, make sure the organization is 501(c)(3) Campo explained. The IRS has its own database where you can search for registered nonprofit organizations.
To review a charity’s integrity and mission, talk to people at the organization to learn about their programs and goals. Finally, see if the charity specializes in “selling cars at auction for high prices,” or if they can sell cars for a higher price than you can, Lucas says.
If you own a car worth $5,000, see if they can get that amount at auction. If they can’t, you might be able to help the charity more by selling the car for $4,000 and “just donate cash at the time,” he adds.
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