How To Donate A Car For A Tax Deduction

Janet Berry-Johnson, CPA, is a freelance writer with a background in accounting and income tax planning and preparation for individuals and small businesses. Her work has appeared in Business Insider and The New York Times. Janet has been nominated a.

Janet Berry-Johnson, CPA, is a freelance writer with a background in accounting and income tax planning and preparation for individuals and small businesses. Her work has appeared in Business Insider and The New York Times. Janet has been nominated a.

Janet Berry-Johnson, CPA, is a freelance writer with a background in accounting and income tax planning and preparation for individuals and small businesses. Her work has appeared in Business Insider and The New York Times. Janet has been nominated a.

Janet Berry-Johnson, CPA, is a freelance writer with a background in accounting and income tax planning and preparation for individuals and small businesses. Her work has appeared in Business Insider and The New York Times. Janet has been nominated a.

Doug Whiteman is an award-winning journalist with three decades of experience covering personal finance, starting when he was the Washington, D.C.-based consumer news editor and reporter for Associated Press Radio in the 1990s and early 2000s. He's p.

Doug Whiteman is an award-winning journalist with three decades of experience covering personal finance, starting when he was the Washington, D.C.-based consumer news editor and reporter for Associated Press Radio in the 1990s and early 2000s. He's p.

Doug Whiteman is an award-winning journalist with three decades of experience covering personal finance, starting when he was the Washington, D.C.-based consumer news editor and reporter for Associated Press Radio in the 1990s and early 2000s. He's p.

Doug Whiteman is an award-winning journalist with three decades of experience covering personal finance, starting when he was the Washington, D.C.-based consumer news editor and reporter for Associated Press Radio in the 1990s and early 2000s. He's p.

| Personal Finance Editor

Updated: May 14, 2024, 5:59pm

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That old clunker gathering rust in your backyard or driveway could be worth big money to your favorite charity and provide a nice tax write-off for you.

Even junk cars can be auctioned for parts or for restoration and reuse. Charities that seek donations of unwanted vehicles—regardless of the condition—benefit when the cars are sold.

Meanwhile, donors may be able to get a tax deduction for the vehicle’s value.

Many charities make it easy for you to donate your car and may even pick it up if it’s no longer running. But if you hope to claim a deduction, you have to follow IRS rules for donating a car.

Unlock hope, donate your car to Habitat for Humanity's Cars for Homes program.

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How Much of a Tax Break Can You Get for Donating a Car?

Your tax deduction depends on the vehicle’s worth and how the charity intends to use it. If the car is worth less than $500, you can claim its fair market value (FMV).

If the car is worth $500 or more and the charity intends to use the vehicle in its operations, you can deduct the FMV. However, if the charity sells the car, your tax deduction is generally limited to the organization’s gross proceeds from the sale.

Claiming a Tax Deduction for a Car Donation

To take advantage of the deduction that’s available when you hand over an old car to charity, you must:

Itemize Deductions

You’ll need to itemize deductions to get a tax break for your contribution. However, if you claim the standard deduction—which nearly 90% of taxpayers do—donating your car won’t benefit you at tax time.

Gather the Right Documentation

Your car donation tax write-off and the documentation you need will depend on the value of the vehicle and what the charity will do with it. The organization may use the car in its operations or sell it and keep the proceeds.

Regardless of how the charity uses the vehicle, if you plan to claim that the car is worth more than $500, you must get a written acknowledgment of the donation. That acknowledgment must contain:

• Your name and Social Security number or taxpayer identification number
• The car’s vehicle identification number (VIN)
• The date of the contribution
• Confirmation that the charity didn’t provide any goods or services in exchange for the donation—or an estimate of the value of any goods and services that were provided

If the charity sells your vehicle, then your deduction is limited to the proceeds from the sale, which may be less than you believe the car is worth.

For example, if you donate a car with an estimated value of $3,000 to a charity but the charity sells the car for $2,000, your deduction is capped at $2,000.

Once the car is sold, the charity should send you Form 1098-C, “Contributions of Motor Vehicles, Boats, and Airplanes,” within 30 days. The form should contain:

• A statement certifying that the charity sold the car in an “arm’s length transaction between unrelated parties.” In other words, the charity didn’t sell it to an employee or another related party at a discount.
• The date the vehicle was sold
• The gross proceeds received from the sale

However, if the charity intends to use the car in its operations, you can deduct the car’s fair market value on the date you donated it. In that case, the written acknowledgment from the charity should confirm that the organization plans to use the vehicle and describe its intended use.

When you file your tax return, you’ll need to attach Form 1098-C or any other written acknowledgment, along with Form 8283, “Noncash Charitable Contributions.” If you use any of today’s best online tax software products, the program should fill out the required forms for you automatically after you answer questions about your donation.