December is here and the end of the year is quickly approaching! That December 31st tax deadline is looming on the horizon. Your old truck is sitting in your driveway taking up space. You offered it to your son as a drive around car while he’s in college, but the transmission is going out and now you’re torn about whether it’s better to sell it for scrap or donate it to charity. The problem is, you are hearing conflicting things about the car donation process and how the tax deduction works with vehicle donations. One of your co-workers donated a Mercedes Benz to charity and received a nice car donation tax deduction, whereas your friend said she got her car turned down by the charity because she it didn’t run and besides, she’d only get a $500 deduction for her old clunker. What is the real scoop and what should you do with the truck? Is it better to donate a car and get a tax write off or sell it to your local scrapyard for a few hundred bucks?
To help you decide which option provides you with the best benefits, we’re here to answer your questions and hopefully clarify the facts from the myths on the topic of car donations and those sought after car donation tax deductions.
There is a deadline to donate for the current tax year if you want to get a tax deduction.
FACT! Mark your calendars! The deadline to donate a car for a tax deduction is December 31st at midnight if you plan to claim it on this year’s tax return. And be aware that you can’t just call in the donation at 11:59 p.m. To be in the safe zone with your tax break, you should submit the car for donation and at least have the title in the mail/post marked before the December 31st deadline passes.
Donating a car is convenient and saves time and money.
FACT! Getting your car ready for sale often involves spending time and money fixing and cleaning it up. Whether it’s a smaller expense like having to get your car detailed or a costlier mechanical fix, these are all expenses you don’t have to mess with when donating. In addition to being able to move your car “as is”, another service many charities offer with donated vehicles is the handling of replacing lost title, or expired registration.
Only running cars can be donated.
MYTH! One of the major reasons individuals choose to donate their vehicles is because they discover major mechanical defects that are not worth fixing. Most charities who get a non-running car donated, either sell them at auction or at salvage and benefit from the proceeds. Not all charities pick up clunkers in all areas, however, so if you find one that turns you down, keep going down the list till you find one who will take it.
The car doesn’t really help charity anyway.
MYTH! I classified this as a myth here, but with a caveat. You should do a little homework to make sure the charity you are donating to is an actual charity and not a scam. You can usually get a good feel for the charity by checking out their website or giving them a call to find out what exactly your donation is benefiting. There are also several websites, such as Guidestar, where you can verify that a charity is legitimate. If you’d like to see more of the profit from your donation benefit charity and less go to middle men, you can also try calling up the charity directly to make your donation. This way you can make sure the charity is a bonafide 501(c)3, IRS recognized charity, that your vehicle is going to a good cause,and ensure that you get the right tax paperwork and receipts so you can claim your vehicle donation tax deduction.
Donating Your Car Does Make a Difference!
FACT! If you want an easy way to make big difference, remember that donating your car to charity makes it possible for the benefiting charity to funds a variety of projects. Donated to the right charity, that same old clunker that is an eyesore and a money drain, may help feed, house and educate a child or two in a third world country for a year! Your old Toyota with high mileage, but which is still running, may be the perfect run around car for a low income college student if you find a charity with the right program.
You get a tax deduction you can’t use.
MYTH and FACT! Since charitable tax deductions, including those received for car donations, benefit everyone differently based on their income bracket, you should determine whether you will file for standard deductions or whether you will itemize your deductions. If you only file for standard deductions, you probably won’t get much tax benefit from making a car donation. However, if you itemize, a vehicle donation will benefit you by lowering the amount of taxable income.
You can’t get Fair Market Value for vehicles anymore.
MYTH! This is a myth we often hear and while it’s true that it’s more difficult to get a Fair Market Value deduction these days, it’s not impossible. There are stricter guidelines in place only allow you claim FMV if 1) the charity makes a significant repair to your car so they can sell it for a higher price, 2) the charity uses your vehicle in the course of their work and 3) if they re-donate your vehicle to a needy (qualifying) individuals. So the bottom line is, yes, you can still get the FMV tax deduction, however, there are a lot more hoops to jump through. If you have a higher end, more valuable vehicle, call or email the charity you are considering making the donation to, and ask them specifically if they have that type of programs that allows you get the fair market value deduction. If they do, find out what their requirements are for vehicle to be a part of this program and whether your vehicle will qualify.
Now that we’ve dispelled some of the most common myths about car donation, whether you sell or donate your old car boils down to a whether you would rather have the cash instead of a tax break. If so, then sell your old vehicle. If, on the other hand, you're feeling generous and would rather not spend more time and money getting the clunker in sellable shape -- giving it to a charity might be the better route.