As the end of the year approaches, many people begin looking for last-minute tax deductions. If you’re in the market for a new car, one of the factors to consider in the decision-making process is whether or not to donate your old vehicle. There are a few things you’ll want to keep in mind as you make your decision. Here’s a breakdown of the benefits of donating your vehicle.
It’s tax-deductible – As previously mentioned, one of the most compelling reasons to donate your car is for the tax deduction. The IRS explains the rules for tax deductions when donating your vehicle, including when you may deduct the vehicle’s fair market value (which you can determine with a used-car guide, such as Kelley Blue Book). If the charity sells the vehicle, you’re entitled to deduct the final sale price. If the organization uses the car for other purposes, you can deduct the fair market value. For additional help, check out TurboTax for some helpful steps that you’ll need to follow to maximize your deduction.
They make it easy – Charities that accept vehicle donations, such as MotherWaddles.org and WheelsForWishes.org, have processes in place that make things very easy for you. Mother Waddles says that upon receiving your donation, they’ll give you a tax-deductible receipt for the Kelley Blue Book value of your vehicle. They also offer free pickup of your car.
Doing the research and setting up the pickup does take a little planning and time. However, you may find that it’s well worth it when you consider the benefits in the long run. Remember that you must complete the transaction by December 31 in order to qualify for this year’s tax break.
You get to help those in need – It can be very rewarding to know that your donation will be used to help others in need. Whether the car is sold at a reduced price to those with limited incomes, or it’s used within the charity, you can rest assured knowing that your donation has made a difference.
The state of your vehicle doesn’t matter – Another great thing about donating is that many charities will accept your vehicle even if it’s not in working shape. That, combined with the fact that they’ll often pick up the car for free, means you could very quickly rid yourself of an unwanted burden with very little effort.
Be sure to do your research before donating your vehicle, as there is the possibility of running into a fraudulent charity. However, the Internet can be a great place to start looking for local charities that are well-established with good reviews.
Alternative Option: Sell Your Car and Donate the Money
If you have a specific charity in mind that doesn’t accept vehicle donations, it could make more sense for you to sell your car on your own, and then you can donate the cash to the charity of your choice. While this option may require more work on your part, you may find that you get more money with the sale. Then, you can donate your money to a charity of your choosing, or you can spread the love and donate the proceeds to several charities.
Do you have any tips to share for those interested in donating their vehicles to charity? Share them with us in the comments below!
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