There are times when it makes sense to donate a car to charity rather than selling it. One of the benefits of doing so is if you itemize your federal tax returns. You can write off the value of the vehicle you donated which reduces your tax liability to the IRS. It also reduces the clutter and possessions in your life which is a great way to reduce the headaches of dealing with too much stuff.
For those who want to do a tax deductible car donation Lapeer County MI there are a number of options to choose from. There are both local and national nonprofit organizations who would be happy to take your vehicle away for you. they will sell the vehicle and use the money to fund their operations and meet the goals this nonprofit has set out for itself.
In this article, USA Today wrote about when it makes sense to donate a vehicle in order to receive the charitable tax deduction on your federal return. As they point out you must be itemizing your return. If you simply take the standard deduction donating your vehicle won’t reduce your tax burden. It’s likely that the standard deduction will far exceed any deduction you could get from just donating one vehicle.
They also point out that the charity you are donating your car to must qualify. It has to be either a 501(c)3 nonprofit organization or one that is religious in nature. In this USA Today article, they provide a link to the IRS’s search tool which shows whether an organization is considered exempt or not.
The value you will get to deduct from your IRS return is the fair market value. This is defined as how much a willing seller and willing buyer would determine to be a fair price for the car. There are specific rules about this as well, such as if the car is worth less than $500, which the USA Today article goes into detail about.
Another helpful resource about donating your vehicle and getting a tax deduction is this article posted by CBS News. The article states that you can deduct the selling price rather than the fair market value. This means you get to claim a deduction that meets the amount that the charity got for your vehicle. This could be how much the sold it for to a third party, how much they got for selling it to a salvage yard, or other ways the dispensed with the vehicle.
The problem with this method is that the nonprofit might have gotten less for the car then what you could have sold it for yourself. Also, if they do put the car up for auction it could be months down the road which complicates how you can find out how much it was sold for. You might even have to file for an extension on filing your federal tax return if you donate your car and the nonprofit still hasn’t sold it by May of the following year.