The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Donate Car for Tax or Sell?||Date: 9/11/2007 9:46 PM|
|Author: ptheland||Number: 95815 of 124282|
I was trying to figure out which of two options would make most sense from a financial standpoint?
OK. I'll admit up front that you've hit one of my pet peeves. So apologies in advance, as I'm probably going to get a bit riled up.
Based on the way you asked the question, this is a simple decision. But let's review quickly just so you can see why I say that.
What is the allowable deduction for a donated auto? Today, it is the "sales price" the charity gets for selling the car. I'll explain the quotation marks in a minute - that will be the ranting part.
Since the charity isn't going to take a lot of time and effort to sell the car, they basically sell them on the wholesale market. So as a quick approximation, they'll sell for roughly the trade-in value of the car. That becomes your tax deduction.
The deduction goes on your tax return, where is saves you taxes at approximately your marginal rate - give or take some various phaseouts.
So if you donate a car that the charity sells for $1000 and you're in the 25% tax bracket, you save $250 in taxes. The alternative is to sell it yourself for the $1000 and pocket that.