If you have an old vehicle languishing in your driveway and no plans to trade it in to purchase a new one, you can get rid of the eyesore and put some extra money in your pocket by donating it to charity. Doing so lets you take a one-time deduction off your taxes, which means you pay less when the IRS comes knocking. Maximize how much you receive for your donation requires a bit of strategizing based on the condition of the vehicle. Here's what you need to know to get the most for your vehicle.
Clunkers and Unusable Vehicles
It's best to give vehicles that don't run or are so old they don't have much monetary value directly to the charity. If the vehicle can't be fixed or sold, the charity will send it to a salvage yard. However, the organization will provide you with a receipt for the donation that lets you write off whatever value was left in the vehicle from your taxes. So even though you may have already been planning to give the vehicle to the junkyard, taking the extra step to donate it to charity will earn you a tax write off.
Vehicles that are still usable require a little more strategizing to maximize the amount of money you can write off your taxes. This is because the IRS lets you write off either the vehicle's fair market value or the amount the charity sells it for. For instance, if the fair market value of the car is $5,000 and the charity sells it at an auction for $4,500, you can only write off the $4,500.
The first thing you need to find out is what the charity intends to do with the vehicle. You can write off the full market value of the car or truck if:
- The charity intends to use it
- The organization plans to make major improvements to the vehicle (e.g. replace the engine)
- The charity plans to sell it to a needy person at a discount
If the organization plans on doing any of these things, then giving the vehicle to them as-is will help you get the biggest deduction you can obtain for it.
On the other hand, if the charity intends to sell the vehicle at an auction or privately to a non-needy person, you will only be able to write off the sale price. Therefore, you need to determine if you can get more for the vehicle by selling it yourself. If you think you can get more for the vehicle than the charity would, sell the vehicle and donate the proceeds directly to the organization. However, be certain to factor in any costs that may be involved with the selling process, including your time to ensure this is the right option for you.
For more information about giving a vehicle to charity, contact a local non-profit organization, like Newgate School, that handles these types of donations.