Don’t Ditch Your Old Car—Donate It!

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Find a reputable charity and offer your vehicle to someone in need.

When you’re ready to get rid of your car, you have various options to consider: trade it in at the dealership, attempt to sell it to its next owner or sell it to a used-car dealer. While selling the car yourself is generally considered the best way to get the most money, you could harbor reservations about attempting to do business with complete strangers.

Here’s another consideration: Donate your car to charity. You’ve probably heard those “wheels for charity” radio ads, the ones that promise sizable tax deductions while giving you the opportunity to make a generous donation to a good cause.

For many, it’s a win-win option, but it can also amount to a complex undertaking. To help make sense of it all, here are key points you need to know about donating a vehicle:

  • Make sure your designated charity maintains current 501(c)(3) tax-exempt status with the IRS. Any legitimate charity will be able to provide the necessary, supportive documentation to you to validate this. For help researching a charity, check Charity Watch, a rating and evaluation service dedicated to helping donors make informed giving decisions.
  • Since 2005, the IRS has limited the deduction to the actual selling price that your charity of choice receives for the car if the vehicle is valued at more than $500 (as opposed to getting the full suggested retail price that a dealer would get for reselling it as a trade-in). You have to attach a statement of sale to the tax return to get the deduction, which you can get from your charity organization of choice. This means that you won’t know the full deduction amount until you donate it. However, if the sale is $1,000, you’d walk away with $330 if you’re in a 33 percent tax bracket.
  • If the car sells for less than $500, you can claim a deduction of fair-market value or $500, whichever is less. Market value may be determined via resources such as Kelley Blue Book, Hearst Black Book and/or the National Auto Dealers Association—as well as the Edmunds True Market Value (TMV) Used Vehicle Appraiser. Be accurate when it comes to inputting figures for age, mileage and condition of the automobile.
  • Be cautious about for-profit companies that help charities get donated vehicles, because they often take a pretty sizable cut of the sales price for themselves. This, of course, reduces the amount that ends up supporting the cause.
  • If you pick a charity that uses the vehicle for operational purposes or gives it away to the economically disadvantaged (as opposed to selling it), you can deduct its fair-market value, which may turn out to be a better deal.
  • Be mindful that non-cash donations may trip up an audit alert within the IRS, which means proper documentation is essential.
  • For more information, try the IRS donor information guide.
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