Is this your situation? You have a beat up old vehicle on your hands. You’re thinking you might want to sell your junk car, provided you could get a decent amount of cash for it. But, you’re not sure if it’s the way to go. Then, it occurs to you that you could donate your junk car instead of selling it. Would that make sense to do? What kind of a tax break could you get? How does the donation process even work?
In today’s blog, we’re going to take a look at what’s involved in donating your vehicle (and what the potential tax ramifications might be). From there, you’ll be able to make an informed decision about whether you should donate your junk car or sell it for cash.
There are some nonprofit organizations and charities which are only interested in taking a donated vehicle if it’s in good, running condition. That said, it’s much more common for a charity to say “yes” to the offer of any vehicle, regardless of what shape it’s in. Why? Well, think about it: even if the vehicle is totally useless from a practical standpoint, they can still sell it as a junk car (either to a junk car buyer, or at an auto auction) and turn it into cash which the organization can then use for other purposes.
When you donate your junk car, can you deduct its value from your federal income taxes? The answer to that question is a bit complicated.
First off, you need to do a bit of work before choosing an organization to donate your vehicle to. If you want the donation to be tax deductible, you’ll need to ensure that any organization you opt to work with is registered as a 501(c)(3) with the IRS. This nonprofit status is important, as it’s the only way that your contribution is going to be tax deductible.
Next, it’s important to remember that the only way you can deduct the value of your donated vehicle from your taxes is if you opt to itemize your deductions on Schedule A of your IRS form 1040. Many taxpayers -- the majority of them, in fact -- opt to simply take what’s called the standard deduction on their income tax return. Beginning with the tax year 2018 (following the new tax bill which was signed into law at the end of 2017), the standard deduction is $12,000 for individuals, $18,000 for heads of household, and $24,000 for married couples filing jointly.
In many instances, it makes more sense from a tax perspective to simply take the standard deduction rather than itemizing your deductions. This is due to the fact that for many taxpayers, the total sum of all of your expenditures and donations which could be itemized on your Schedule A is actually lower than the standard deduction.
In conclusion: make sure that you’re actually going to itemize your tax deductions for the current tax year. If you don’t plan on doing so, you won’t be able to deduct the value of the vehicle that you donate.
Overall, selling your junk car is often the way to go. If you’re looking to sell your junk car, just call Rusty’s Auto Salvage at 866-439-4401. Our friendly customer service representatives will quote you a price for your vehicle instantly. Call us today!
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