Selling Versus Donating A Car

What you Need to Know about Donating a Car of Truck

Donating your car or truck (or any motor vehicle manufactured mainly for use on public streets, roads, and highways) is a wonderful idea if you have a charity in mind that wants to use the vehicle for their organizational activities, or you have a working vehicle that can be used by an individual in need that is not somehow related to you.  In both cases you will be allowed to take a reasonable deduction for the market value of the vehicle. You will feel rewarded for providing something of great use to someone clearly in need. The IRS has a number of stipulations in order for you to take this deduction. More information can be found on the IRS.gov website.

In almost all other cases, simply selling your car or truck to a licensed auto recycling company will yield you the best financial gain. For the past several years, junk cars have been fetching between $250-$500 from recyclers who purchase them. This represents after-tax cash in your pocket.  If you donate your vehicle to a charity and that charity simply auctions the car off, or if it sells the lead to a towing outfit, the maximum deduction you may take off your Federal income tax is $500, and in many cases may be less.  In most tax brackets, this deduction will yield a tax savings of much less than the cash you will get by simply selling it to a licensed auto recycler.

In no way is this information designed to discourage anyone from giving to charitable organizations.  In some cases, selling your car or truck and then donating the proceeds to the charity of your choice may result in a larger donation and deduction, while alleviating you from the hassles of complying with complex tax deduction criteria. We urge you to continue to support those agencies that help people in need. Please read research the tax rules relating to car donations.

Determining The Value of A Donated Car

If you donate a car to a charitable organization you must determine its fair market value.  Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. The guides may be published monthly or seasonally, and for different regions of the country. These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. The prices are not “official” and these publications are not considered an appraisal of any specific donated property. But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. These publications are sometimes available from public libraries, or from the loan officer at a bank, credit union, or finance company. You can also find used car pricing information on the Internet.

To find the fair market value of a donated car, use the price listed in a used car guide for a private party sale, not the dealer retail value. However, the fair market value may be less if the car has engine trouble, body damage, high mileage, or any type of excessive wear. The fair market value of a donated car is the same as the price listed in a used car guide for a private party sale only if the guide lists a sales price for a car that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated car.