Bailey Scarano Blog

Donating a Car to Charity May Not Be the Best Way to Go

We’ve all heard the ads suggesting that you donate your old car to charity. And in some cases, this might be a good idea. But it is more complicated than you might think, so let’s pump those brakes for a minute.

Donating an old car to a qualified charity may seem like a hassle-free way to dispose of an unneeded vehicle, satisfy your philanthropic desires and enjoy a tax deduction (but only if you itemize). But in most cases, it’s not the most tax-efficient strategy. Generally, your deduction is limited to the actual price the charity receives when it sells the car.

You can deduct the vehicle’s fair market value (FMV) only if the charity 1) uses the vehicle for a significant charitable purpose, such as delivering meals to homebound seniors, 2) makes material improvements to the vehicle that go beyond cleaning and painting, or 3) disposes of the vehicle for less than FMV for a charitable purpose, such as selling it at a below-market price to a needy person. 

If you decide to donate a car, be sure to comply with IRS substantiation and acknowledgment requirements. And watch out for disreputable car donation organizations that distribute only a fraction of what they take in to charity and, in some cases, aren’t even eligible to receive charitable gifts. We can help you double-check the idea before going through with it.