How Much is my Donation Worth?

When it comes to car donations, many people automatically think of two words: tax deduction. What is a tax deduction? It is when a person can write off an expense acquired during the course of their employment or in the process of donating. If a deduction is accepted by the IRS, the person will get a lowered tax bill or receive cash back. However, when it comes to making deductions from car donations, the difficulty is determining exactly how much a person will be able to deduct.

Legally, a person can only deduct based on how much a charity sells their car for, if the car is worth more than $500. They can find out this amount when the organization sends them a sales receipt. The only exception to this rule is if a charity uses the donated car as a part of their business. In these instances, a person is allowed to deduct at market value. Edmonds.com is an excellent resource car owners can use for helping to determine their car's market value.

What if a car is worth less than $500? In this situation car owners make their deduction based on blue book value, regardless of how much the car actually sells for. Blue book value allows for a more generous pricing than market value. In order to find out a vehicle's blue book value, car owners can visit the Kelley Blue Book's website at KBB.com.

It should be noted that under no circumstances will a person be allowed to deduct at actual retail value for their cars. Market value and blue book value account for the depreciation that instantly occurs once a car moves off of the lot of its dealership. And as far as charity sales, organizations do not need to sell at the highest price in order to make profit. This is because they are already getting the vehicle for free… anything they receive makes them in the green.

If a person wants to try to get a higher value for their car, they can consider selling it over donation. However, most people that buy used cars are going to expect a significant value. It will be very rare that a person would be able to sell it at retail price. If they are it's usually because they had to invest extra money to get it refurbished. For this reason car owners must settle for selling their old vehicles at prices that are astoundingly low. In some cases a car owner may only make just a few hundred dollars.

So, how can a car owner determine whether it's better to donate versus sell? If their vehicle is newer, selling is definitely a better option. However, if the vehicle is old whether or not it's in running condition, it is better to just donate it. The costs associated with refurbishing would be too expensive to really make the car still worthwhile, and selling it may not yield virtually anything. This is if one can even get customers interested enough to buy.

In conclusion, when it comes to car donations and deductions, one will either: make a deduction based on how much the charity sold their car for, make a deduction according to blue book value if the car is less than $500 or make a deduction according to market value. If a person is not satisfied with these amounts, they can try to sell the vehicle on their own, though if the vehicle is old it might be better to donate it regardless. However, if a vehicle is new, donating for deduction purposes would basically be placing money down the drain.