How a Car Donation Tax Deduction Turns a Frown Upside-Down
August 07, 2018
The headache of unloading a car you don’t need is quickly eliminated with the benefit of a car donation tax deduction. And that’s in addition to how much easier it is than trying to sell your own car.
We’ve all been there. Your car just isn’t serving your needs anymore – it’s too big, too small, a gas guzzler, etc. It leaves you with a major hassle – decisions, decisions. Do I hang onto it? Is it still worth anything?
But it’s also an opportunity to turn something as ordinary as a car into a charity donation while gifting yourself with a car donation tax deduction.
You know how good it feels to be the hero ... and there are countless non-profits that would feel a wave of gratitude because of your generous act. You get to choose who gets proceeds from your vehicle – which only makes sense – but you need a business that offers you that option, among many others.
What is the Best Car Donation Tax Deduction Company?
While the bones of the process are pretty much the same, there are companies with features that benefit you more. Just one of those is the ability to choose your own charity. If a company is qualified to process your car donation tax deduction, but you only see one charity listed on their site – you aren’t getting a choice. Chances are they represent that 501(c)(3) organization.
Even more importantly, choose a vehicle donation company that maximizes the value of your donation car, and thus, your tax write-off. The total deduction you take is based on the final sale price of your car.
That means that whoever can sell your vehicle for a higher price is beefing up your car donation tax deduction. So, pick seasoned donation experts who have the best potential to increase the value of your car (and heighten your tax break).
Does the donation company pick up your car and do repairs? If you’ve ever sold a car, you know that vehicles that run/look/feel better sell for more money. With that in mind, at Cars2Charities we pick up car donations and bring them to one of our technicians for an assessment, right off the bat. We’ve found that vehicles we have made improvements on sell for about 25-50% more than those without the changes.
Are You Looking for the Best Car Donation Tax Deduction Information on the Web?
Of course, you are – and there are plenty of reliable sources. For starters, a step-by-step guide for vehicle donations is accessible from the IRS regulations website. You’ll get the rules, IRS publication 4303, but you also want to do your research before choosing a car charity company to work with.
Though many of us wait until our paperwork is with the CPA, or until we’re facing our computer doing TurboTax (on April 14) to figure out our write-offs, this is a year-round opportunity. The beauty of a vehicle donation is that you can secure your car donation tax deduction whenever you replace a vehicle.
There are a number of other write-offs you can do – and you probably have. But donating a car to charity gives you a lot more buck for the bang.
For instance, do you clean out your closet every year and take a big load to a thrift store?
If you consult the Goodwill donation valuation guide, you see that it only adds up to a couple of dollars here and there. While a shirt gives you a deduction of four dollars, a car can give you a deduction of four digits.
The Turbo Tax site does a good job of explaining the value of a car charity donation. You can compare the tax receipts you get from donating items around the house versus one big item, like a car. In fact, Intuit suggests you strongly consider donating your car.
It says, “Deducting your car donation can save you a significant amount of income tax.” And the site adds that the IRS has increased the necessary documentation for car donations, so make sure the company that processes your vehicle donation operates by the book.
How Do You File a Car Donation Tax Deduction?
If you’re pretty green when it comes to tax details, it can help to consult someone like H&R Block. They will clarify some important aspects of the car donation process, for instance, qualifying donations include:
• Recreational vehicles
Regarding documentation, the tax preparer will tell you that you should receive Copy B of IRS Form 1098-C within 30 days of the sale of your vehicle. Both you and the charity are responsible for filing it.
So, let’s say you wanted to benefit veterans with your car donation tax deduction, so you chose Wounded Warriors, or another one from several others on our veteran’s causes page. After your vehicle is sold, you and the veteran’s charity each get a copy of Form 1098-C and you both file it at tax time.
The hassle-factor is something you have to pay close attention to, because it has a lot to do with the company you choose to process your car donation tax deduction. We take care of all of your paperwork, for instance. If you have the title to the car, we do the title transfer (no DMV lines for you!). If you don’t have the title, we just ask you to sign some papers so we can complete the forms.
To put it plainly, your goal is to work with a car donation company that makes the process really EASY – finishing and mailing you the paperwork for accounting purposes. Because if the desire for an easy out makes you tempted to fall back into the dealer trade-in idea again, be aware you lose from 60-70% of the value of your car.
Trading it in or using CarMax means you lose the financial advantage of gaining a car donation tax deduction. Yes, you’re doing something nice for someone who needs it, but donating your vehicle also gives your bottom line a boost and it makes you (and your CPA) happy.