Over the years, I’ve had some friends and customers tell me that they were going to donate their car. They were attracted to this idea because of the tax deduction and the ability to help out a charity of their choice. Unfortunately, there’s a lot of bad information out there about donating your car. Donating your car is sometimes a little confusing, like buying a used car Spokane has to offer. A simple internet search can clear up a lot of confusion.
If you’re donating your car for the purposes of a tax deduction, you need to know the math and the rules. The IRS doesn’t make anything easy. Some friends of mine think that you get to write off the book value or fair market value of the auto from estimated taxes owed. For example, if I paid $7,000 in taxes last year and if I donate my car to charity for $4,000, then I only need to pay $3,000 in taxes and I don’t have to go through the hassle of selling my car.
It’s not quite that simple. Let’s say you’re in the 15% tax bracket and you donate your car to a legitimate charity and the fair market value is $1,000. If they sell that car for $1,000, you get $150 off your taxes you owed. That’s 15% of the sale price. As explained in one of the articles I found; if you’re filing under the 940-EZ, you can’t take the deduction because you’re already getting a standard deduction of $5,950. To get the deduction, you’ll have to itemize on a 940 tax form.
At the end of the day, you’re better off selling the car privately or to car dealers in Spokane and then donate that money to your favorite charity.. Also, because of your generosity, you should keep a few bucks and buy yourself a nice lunch for being awesome. You’ve earned it!
I found several sites that explain the ins and outs very well, https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/How-Do-Tax-Deductions-Work-When-Donating-a-Car-/INF14391.html and https://www.irs.gov/pub/irs-tege/pub4303.pdf
From your friend,
Bill Van Dinter