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Shopping for a New Car? Donate Your Used One!

Shopping for a New Car? Donate Your Used One!

As you shop for a brand-new vehicle this holiday season, instead of trading in your old car, how about donating it to charity? Donating your used car helps benefit the community by providing families and others in need with a new set of wheels. Plus, it can benefit you as tax season rolls around. Learn more about the benefits of giving your old ride a new mission, thanks to your local charitable organization.

Shopping for a New Car? Donate Your Used One!

Looking for a new car? Consider donating your old one. Your tax deduction may be more valuable than what you can get in either a trade or sale.

Why Donate Your Vehicle?

According to statistics from the U.S Department of Transportation, there are over 254 million vehicles registered in the United States. Many of these vehicles are likely to end up on dealership back lots as trade-ins for new cars. Older vehicles with lower trade-in values, some in less-stellar condition, often end up in salvage yards or in the jaws of the crusher.

Donating your car to a local qualified charity is a great way of freeing up some needed driveway space, especially if it’d be difficult to trade in or sell on your own. It’s also a great way of giving back to the community by helping families and individuals get behind the wheel of an affordable vehicle. Donating your vehicle is as simple as filling out a form. Most charitable organizations offer a free tow service to pick up the vehicle.

Never underestimate the power of gift-giving. Sometimes, good karma comes through in ways you would never think of. Giving someone the gift of transportation can be a life changer for them, and as you purchase your new vehicle, you can feel better about “gifting” yourself. When you buy your vehicle, just be sure to purchase from a trusted dealership or owner, and always inquire about condition, and history. You can purchase vehicle protection plans through places like Carchex, and use KBB or Carfax to find history reports and pricing.

It Benefits Those in Need

USA Today found that used car prices were on the decline for the third quarter of 2013, with the average used car offered at a franchised dealership costing $15,617. Despite falling prices, that’s still out of the reach of millions of struggling families in need of reliable transportation. A donated car can be a blessing in disguise for those living in areas where public transit options are severely limited or nonexistent.

The majority of donated vehicles are often reconditioned by highly skilled mechanics and resold to those who need cheap and reliable transportation. Even if your vehicle is not in its best shape, it can still see new life in the hands of someone who needs an affordable used car.

It Benefits You, Too

Car donations not only benefit those in need of a reliable used car, but you also get a tax deduction for your troubles. After the charity picks up the vehicle, you’ll receive IRS Form 1098-C by the end of the tax year. This form allows you to complete the required paperwork to take advantage of your deduction.

Despite a declining trend recorded as far back as the 2000 tax season, car donations remain a viable way for taxpayers to reduce their tax burden. Over 198,000 tax returns for the 2009 tax year featured tax deductions for vehicle donations, according to a recent report from the Internal Revenue Service. This figure stands in stark contrast to the 733,000 tax returns that featured similar deductions for the 2000 tax year, according to the U.S. Government Accountability Office.

The IRS requires that donors calculate their deduction based on either the sale price of the vehicle (in the case of charities that sell vehicles at auctions), or according to fair market value (for charities that sell cars directly to needy individuals). You’ll find these fair market values listed in a reputable guide such as Kelley Blue Book.

The IRS warns that donors should be cautious as they turn their used vehicles over to their charity of choice. You want to make certain that your charity of choice is a qualified organization – otherwise, your donation won’t be tax deductible. Most charities are covered as section 501(c)(3) organizations and listed in IRS Publication 78, “Cumulative List of Organizations”. Many churches, synagogues, temples, and mosques are qualified organizations, but they’re not required to be listed in Publication 78.

Tim Esterdahl

Tim Esterdahl is the editor of IFCS blog. He is a married father of three and enjoys golf in his spare time.

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