Vehicle Donation and Tax Deductions
The U.S. tax code allows people to reduce their tax burden through charitable giving. This arrangement works to the advantage of taxpayers and charitable organizations alike. While there are many ways to contribute to charity, one of the simplest and most effective is vehicle donation. Because of the relatively high value of used vehicles, vehicle donation can be a great way to support your favorite charity as well as save money on your tax return.
How it Works
Charities accept vehicles and then sell them for cash. Often, the charities themselves handle all towing and transportation requirements, as well as much of the required paperwork. Vehicle donation generally imposes only minimal responsibilities on the part of the donor.
Although cars are the most commonly donated vehicles, other kinds may also be accepted. Donors can claim tax deductions for the value of vehicles such as:
- Private planes
Even badly rusted or damaged vehicles can bring in several hundreds of dollars, a substantial sum for many non-profit organizations. Donors then deduct the value of the vehicle from their year-end tax returns.
Determining the Value of a Donated Vehicle
When it comes time to file for taxes, charitable giving must be reported accurately. For vehicle donors, the most complicated part of this process is determining the value of the vehicle in question. In a typical case, the charity gives the donor a receipt for the sale of the vehicle. The amount the vehicle sold for is generally the amount the donor should claim as a tax deduction.
However, there are important exceptions. How much you can deduct for your vehicle depends to some extent on whether it sold for:
- Less than $500
- Greater than $500
In order to claim a vehicle donation deduction greater than $500, you may need to include an acknowledgment of sale with your tax return. On the other hand, if a charity sold your vehicle for less than $500, you may be able to claim a larger deduction than the amount of the sale. Through vehicle donation, both charities and donors can use unwanted vehicles to their advantage.
Contact an Attorney
To get the greatest tax credit for your vehicle donation, you may wish to consult with an experienced tax lawyer. Fill out our simple contact form and a knowledgeable representative will get in touch with you to discuss your tax situation.