Donating your car to charity and selling your car to a junkyard are both great ways to rid yourself of an unwanted vehicle. But which way is better? Will you make more money by selling it or by deducting it from your taxes? We\’ll take a closer look at both to help you decide.
Why people donate cars
People tend to donate cars for a variety of reasons:
- Some people want to donate because it\’d be too hard to sell their car on the market – old, unreliable, non-running cars aren\’t attractive to buyers.
- Others think selling is too much work. They don\’t want to go through the trouble of putting up a car listing and entertaining low-ballers. It can take a long time to find the right buyer.
- And some simply don\’t need the money. Maybe it\’s a car of an older relative who passed away and they just want it removed from the property.
On average, there are about 700,000 cars donated every year in the US. Charitable organizations typically take all vehicles regardless of how worn-down they are, and they usually promote the tax benefits as you can deduct the value of the car from your taxable income.
The pros of donating your car
Here are the top selling point of donating a vehicle:
- Free removal: Charities typically offer free removal and, because you\’re helping them, they tend to be very accommodating to your schedule.
- Community goodwill: Donating a car helps your local community and has a direct impact on your neighbors. Doesn\’t that feel good?
- Tax deduction: No matter how much your car is worth, you\’re getting at least a $500 value from your donation for your tax write off. If it\’s more, then you get whatever the dollar value is for it.
The cons of donating your car
There are some downsides when you donate:
- Processing fees: Charities won\’t charge you fees, but they certainly will take some money for all the effort it takes to haul your car off, crush it, advertise their organization, etc. Some keep as much as 90% of the worth of the car.
- No tax impact: Your taxes are based on income brackets – not your individual income. To make a dent in how much you pay in taxes (or what your refund is), your car would need to be worth enough to knock you into a lower bracket. If you\’re on the edge and $1,000 will make a difference, then it makes sense to donate. If not, though, don\’t count on the donation to do much (if anything) for your financial situation.
If I still want to donate my car, where do I start?
Start with finding a reputable charity in your area:
- Skip the charities with the flashy gimmicks and national advertisements. Look for a 501(C)(3) charity (to double-check that you found one, check the IRS registration list here), and select a cause that you care about.
- Make sure that you\’re signing over ownership. If you don\’t, then you\’re liable for future fines. It\’s also a sign that you might not be working with a charity as honest as they seem.
- Watch the paperwork. If you\’re deducting a lot, the IRS is more likely to audit you. If the car is worth $500 or less, you\’ll be good with the standard paperwork. Anything more than that, and you\’ll need to fill out either a 1098-c or 8283 form.
Where can I donate my junk car?
Pretty much anywhere. Plenty of people will take your car off your hands if you\’re offering it for free.
You just need to avoid for-profit middlemen when you\’re donating. While they streamline the process, they cut the value of your car donation. It\’s better to deal with the charity directly so that you\’re sure the donation proceeds go toward your chosen cause.
What happens to your car when you donate it?
Pretty much the same thing that happens when you junk it. Once the car is towed away, it\’s stripped for parts and the scrap metal gets recycled. Where it goes from there depends on everything from the global demand for metal to the specific location in which you donated it.
3 things about donating junk cars few people know
- Only donations to a qualified charity will provide a tax deduction.
- The tax policies are changing quite a bit, meaning itemizing the donation may not do anything for your taxes.
- Some charities take up to 90% of a car\’s value. It does take coordination and work to process a junk car, but 90% still seems high to us.
Why sell a car to a junkyard?
A junkyard will give you money today, not whenever you end up filing your taxes. They also might give you more money than you could ever get as a tax deduction.
But selling a junk car to a junkyard has its own pitfalls. At CarScrappers, we recommend checking the reputation of the junkyard you sell to, and go with someone who\’s as transparent as they are efficient.
How do I calculate the tax value of a donated car?
The tax policies are constantly shifting, so this one is tough to answer.
A good rule of thumb is to look at your income from last year and figure out how much you\’ll need to shave off before you end up in a lower tax bracket. This means that you\’re charged less overall, which can result in a serious refund (think: thousands of dollars) for you. Just note that this scenario tends to be on the unlikely side.
Am I better off donating my car than scrapping it?
Depends on who you\’re working with. Some charities end up taking a lot of that value off the top for \’operating costs.\’ Do your research on the organization you\’re interested in.
If you decide to go with scrapping your car instead, work with CarScrappers. It\’s as easy as donating your junk car, but with money going directly into your pocket.