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When does it make sense to donate a car for tax purposes instead of selling. I could get about $1,000 for the car but I do not know what I could get as a tax write off if I donated. Also, where do I find out who to donate it to?


GpWalker
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When does it make sense to donate a car for tax purposes instead of selling. I could get about $1,000 for the car but I do not know what I could get as a tax write off if I donated.

If you're strictly concerned with your $$ bottom line, selling is always better than donating. If you think you can probably sell the car for around $1000, then that's the car's fair market value, and that's what you can deduct as a charitable donation, assuming that you itemize deductions. And if you're in the 25% tax bracket, that means you'll lower your federal taxes by $250. So - $1000 to you if you sell, $250 to you if you donate. (Of course, state taxes saved need to be taken into account as well, but you're still not gonna come out ahead donating.)

So why do people donate? Well, they like to think that they're giving to a deserving charity. (Though truth to tell, the charity typically gets maybe $50 or so for each car...) Probably the best reason to donate is that selling can be a major hassle. If you donate, you're done with it, once and for all. Selling, you have to place ads, haggle with buyers, answer the phone, haggle with buyers, get the car inspected, haggle with buyers, and so on. Donating IS easier, though not as profitable.

And note that charities always say things like "you can deduct the blue book value of your car". Well, not really. Blue book is just an average value, a starting point, if you will. If your car needs lots of work to make it safe/reliable, then you've gotta adjust the blue book value down substantially. What you can deduct is the car's fair market value, which the IRS defines as the price that a willing buyer will pay to a willing seller - in your case, roughly $1000.

As for where to donate, you'll have to look around. Where I live, in the DC-Baltimore metro area, there are about a dozen outfits competing for car donations. (I donated a car to Goodwill about ten years ago.) Where my brother lives, in North Carolina, there appears to be no one interesting in car donations. Go figure.

Lorenzo
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Speaking of selling vs. donating a used car, I heard a radio commercial recently that caught my ear.

This charity was soliciting for used cars. They claim that if they accepted your donation, they would give you a check for 50% of the blue book value AND a charitable donation receipt for the full blue book value. Of course, they claimed to be the only charity doing this, giving you cash as well as a deduction.

Apparently they were looking for specific "types" of cars as they said, "Call us and see if your car will qualify."

I can't think of any way that this could be legitimate. Am I missing something?

Ira
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I can't think of any way that this could be legitimate. Am I missing something?

A legitimate charity cannot value the donation for you. You must do that yourself. They can provide some information sources - like the appropriate page out of the Kelly Blue Book - but they can't tell you what your car is worth. So their receipt for donation should not show any value at all.

In the situation you describe, you would get a charitable deduction for the difference between the FMV of the car and the cash payment.

--Peter
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Well, they like to think that they're giving to a deserving charity.

After reading these discussions, I've realized that's not how it works.

So why do people donate?

The major reason I'll be donating is because someone else will take the car off my hands, because by that time, it won't be worth much of anything.

The last car we had to get rid of was a 10 year old car which wouldn't even start, let alone run. We were offered, maybe, $50.

~~ Alison
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Probably the best reason to donate is that selling can be a major hassle. If you donate, you're done with it, once and for all.

My FIL donated an old car and just recently received a phone call that his car was in the impound and he needed to come pick it up. He told them he no longer owned the car and they said that he could just forget about it then. But it appears that when he donated the car, the title never got properly transferred or something because somewhere he is still listed as the owner of the car.

I have read other stories about similar things happening so just pay attention to that when donating a car.

dt
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I always donate my clunker to either the vietnam vets or other worthy organization..
They either use the car or get a few bucks for it to use for other purposes.
they come at get it at no charge..
For tax deduction purposes, I always take a picture of it from all sides and print out its value from www.kbb.com Do this the day they pick it up.

They give you a receipt and scrape off the window sticker for you to keep.
Keep all this documation incase of an audit.

MEG
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For people contemplating donating a car, keep in mind that at a certain level, you start to lose some of the itemized deductions so you may not be getting as much benefit as you estimate.

rad
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