How To Get a Tax Deduction With Your Car Donation

There are a few ways for you to donate a car for a tax deduction. The question is, which is the best way?

Whether you’re trying to get rid of an unused car, looking to make an impact on your local community, or are just trying to clear up space in your driveway or garage, there’s a way your unused vehicle can get a second life. Some people try to sell their used cars, while others donate that car to a non-profit organization.

Local non-profits use donated cars for special events, to teach students about auto mechanics, or sell them to raise funds. When you donate your car, you’re not only helping an organization in need; you can also earn a tax deduction. That tax deduction can be better than cash when tax season comes around.

Here’s what you need to know about how tax deductions work. Just remember, donate a car: get a tax deduction.

What Are Tax Deduction Donations?

Tax-deductible donations are typically money or goods you give to a tax-exempt organization. When you claim these deductions on your taxes, it can reduce your overall income. The result is a smaller taxable income and a lower tax burden.

In general, you can deduct quite a bit of your adjusted gross income as a charitable donation. There are specific limits depending on the type of contribution and the specific organization that receives your gift.

For example, let’s say you donate your old car to an organization that uses vehicles as fodder for an auto-education program. That program might repair and sell your old car for $3,000. That three thousand dollars would be your deduction. If your adjusted gross income was $50,000, it is now only $47,000. This may not seem like a lot, but it can reduce what you owe in taxes or even plump up your return.

How To Get The Most From You Tax Deduction

Any charitable organization that is worth its salt should help you with the process of claiming a tax deduction when you donate a car. It’s also a good idea to know and understand the process, so you can maximize your deduction.

1. Always Donate to A Qualified Organization

You can only deduct the value of your car donation if you give it to a tax-exempt non-profit organization. The group must be recognized by the IRS as tax-exempt. These organizations include places like the Red Cross, The Newgate School, local museums, etc.

Make sure to also ask the organization how much of your contribution will actually be tax-deductible.

2. Document Your Gifts

No matter how big or small, make sure you always document any donations you give. If possible, get a receipt from the charity. You may also be able to use bank or credit card statements (if you’re donating money) or even a canceled check.

If you donate something that has a value of $250 or more, make sure to get a letter of acknowledgment from the charity. This letter should include what/how much you donated and whether you received anything in return.

Donate Car: Tax Deduction

If you do your homework, donate to a reputable non-profit, and obtain the appropriate letter/paperwork, you should have no trouble deducting your car donation on your taxes. If you’re still unsure, work with a local CPA or tax preparer to ensure that you have everything you need to get that sweet deduction come next April.