If you are looking to get rid of your car and don't want to hassle with finding a buyer, a valid option is donating the car to charity. Before you decide to donate instead of sell, be aware of these 3 things.
Donating Your Car Requires Itemizing Your Tax Return
You must consider what your future tax return will look like for the year that you donated your car. This is because it may not be worth it to donate a car since your tax return will need to be itemized to include the car's value. If you have never had enough deductions to make it worth itemizing your tax return, and your car is not worth much, the donation amount may not make your tax return more than if you took the standard deduction.
If you do itemize your taxes because of expenses related to a small business or your work as a freelancer, the benefits of donating a car can definitely reduce how much you owe in taxes. The value of the car donation will reduce your overall income by the value of the car. Keep in mind that you won't receive a refund equal to the value of the car.
You Must Donate Your Car To A Qualifying Organization
A company being a nonprofit organization is not enough to qualify your car donation as a cash write-off. The charity that you donate your car to must be IRS approved, which means it is a 501(c)(3) charity.
If you are unsure if the organization qualifies, always ask. The IRS also offers an online tool that can tell you if the charity qualifies.
You Must Claim The Fair Market Value For The Car
What makes car donation different from a normal sale with a private seller is that no money is exchanging hands between you and the charity. You are given the value of what the car is worth as a tax write-off instead. This means that your car's value must be the fair market value.
If the value of the car is based off a car pricing guide, make sure that you are matching the exact year, make, and model when determining the car's value. If the value of the car is not correct, there is a chance that you could get audited by the IRS for your car donation.
The bottom line is that if you have enough tax write-offs and you donate your car to a qualifying organization, it can be beneficial towards lowering your taxes.
For car donations, consider a school such as Newgate School.