I have a car that I would like to donate. I have researched it a bit and it say the minimum deduction is 500.00. Is this 500 dollars off the tax bill or is it your tax bracket rate of the 500. I read an article that said the deduction is based on your tax rate so if the car donated is 1000 and our tax bracket is 25 percent you only get a 250 savings on your tax bill. However, other articles just imply that its a straight 500. Has anyone donated before and/or knows the rules?
I donated our old car to our local PBS/NPR station some years ago. Donating a car to a qualified charity is a tax deduction not a tax credit. A tax deduction lowers your taxable income and thus indirectly lowers your tax. So the amount of actual dollar savings on your taxes depends on your tax bracket. Deducted amount x tax rate = actual tax savings.
If you could get a dollar for dollar tax credit for donating a car, charities would be inundated with old cars. A tax credit for donating your car would amount to a convenient way of essentially selling it at its market value. Sadly, that’s not how it works.
It’s NOT a straight $500 credit against your federal income tax liability.
It is a charitable contribution deduction of $500 (or more with Form 1098-C for the sales price that the charity received) on Schedule A.
If your itemized deductions don’t exceed the standard deduction then you get zero tax benefit for donating it.
@Scipio and @Madison85 Thanks.
OP- never heard of what you state you found with research. Donating a car is as above- a charitable donation of a physical good. The charity may give you a valuation to use for tax purposes along with the paperwork they will give you. Looking up the value (did ours decades ago) may be useful for proof.
We donated a car last year. It was a deduction not a credit. The charity we donated to left a letter stating a $500 value and said that we would get a letter for the value if it sold higher than $500 at auction. We did not get an additional letter and we did not expect one as we knew there was no way it would sell for more than that.
Rules changed several years ago and you can no longer look up a value for proof. Deduction is $500 or sales price on Form 1098-C.
Technically it’s the lowest of FMV, $500, or the sales price on the 2098-C. You can’t take a $500 deduction on a $200 scrap car.
From the time we’ve first given up our cars we’ve put out a message to friends and family “ Do you know anyone who desperately needs a car?” We’ve given free cars to a friends nephew who just got back from Afghanistan, a friends neighbor who went through a bankruptcy from medical costs, and anew immigrant who was walking 4 miles to work. Its really been a great thing to be able to do.
We “sell” or donate our cars at $0 to a few hundred dollars to people who can use them. Generally the cars are in excellent mechanical shape, have been maintained, and run well with A/C. Only once, we donated to public radio who had it sold at auction and we got a charitable deduction.
When the kids were young and we had no money, we were the grateful recipients of older cars from family more than once. We haven’t had many new cars. Of the two we don’t have anymore, the one that still ran we gave to a coworker of my H’s. The other wasn’t running and we donated to ARC. We got the 500 deduction from that one.
We have run most cars into the ground. One car still ran but needed the California emissions fix and it wasn’t worth paying for that, so my daughter donated it. The others went to the car graveyard.
We donated 2 cars at different times, but both were donated 10 years ago. The best part of donating was not having to deal with selling the cars. The 2nd best part of donating was they came to our house and took the car away. One on a flatbed. The other time they just drove it away. The tax deduction was nice also, but we will probably donate our next car when the time is right (it is 21 years old and still drives well, just passed inspection) even though we won’t be able to use the tax deduction.
We donated a couple years ago because it was 12 years old and had enough problems that we weren’t comfortable selling it. We donated it to our high school’s auto shop program. The kids fix it up and then it was auctioned. We got to deduct what it was auctioned for. It was a double win for the school - they had the car to learn on, and they got they money from the sale.