If you’ve been wanting to make a donation to a great cause and you’ve also got a car that isn’t working out for you, there’s a good chance that you can create a win-win scenario for everyone. Donating your car to charity will often come with some convenient tax deductions. But you’ll just want to check the tax code first. Otherwise, you might make a wrong turn and miss out on some great tax benefits!
Calculating the Value of Your Car Donation
There are two only ways to calculate the value of a car donation. And that number ultimately boils down to how your donation is being used by the organization. You won’t exactly be able to pick and choose and claim a “higher value” for your donation on your tax return.
Ideally, you’ll be familiar with the logistics of what’s going to happen with your vehicle before deciding whether to donate. When the organization will use the donated vehicle for their own operations—or need vehicles to train others—then you’ll be able to deduct the fair market value of the car on your tax return. But when a charity resells the car, your donation value will actually be based on how much money they receive on that sale. Typically, this number will be lower than the vehicle’s fair market value.
That’s why you want to make sure you’re careful about where you donate. Some qualified charitable organizations will use vehicles to deliver meals or give single parents transportation to and from work. Other groups need cars to help train people who are unemployed and want to start learning about auto repair and body shop work. There are plenty of ways organizations use donated vehicles, you just need to find the one that matches your interests.
Market Research and Car Donation Tax Forms
In the eyes of the IRS, a qualifying charitable donation for your car means that it will help further the cause of an organization. Once you find a reputable group, you’ll want to do a little research to determine the fair market value of your vehicle. Checking out the Edmunds or Kelley Blue Book website is usually a good place to start. But just note: You’ll need to have an approved appraisal if the valuation exceeds $5,000.
You’ll also need to collect a Form 1098-C from the organization when you donate your vehicle. Make sure the assigned value on that form either meets or exceeds the fair market value that you’ve already determined for the vehicle.
All that being said, you don’t necessarily need to donate your vehicle to make a meaningful impact. Sometimes the best way to maximize your donation is to simply sell the vehicle yourself and then donate those proceeds to whichever cause you care about most!
We Can Help You Run the Numbers
You deserve to receive a reasonable tax credit whenever you’re making a generous donation to a qualified cause. So if you need a little guidance about taking the next step, please don’t hesitate to reach out to our team! NSO & Company works with individuals and families all throughout the greater Indianapolis area with tax planning and tax preparation. We’d be more than happy to talk with you and help run the numbers to make sure you’re getting the best results and making the most of your car donation!