What Kind of Tax Deductions Do You Get for Donating a Vehicle to a Homeless Shelter?
Whether you're donating your car out of the goodness of your heart or because the hassle of selling it isn't worth your time, you'll still get the tax deduction. However, how the homeless shelter uses the car after you donate it makes big difference on the size of your tax deduction.
When you file your taxes, the deduction for donating a car is classified as an itemized deduction. To claim it, you've got to give up your standard deduction and report it on your Schedule A. So your donation goes to waste -- at least for tax purposes -- if you don't itemize your deductions.
Shelter Sells Car
If the shelter sells your donated car, you're at the mercy of the buyer. In general, the selling price of the car is going to be the amount you can deduct on your taxes, even if the fair market value is substantially more than the sales price. For example, say you donate your car worth $9,500. If the charity auctions it off and the high bid is only $5,000, your deduction is only $5,000.
Shelter Uses Car
If, on the other hand, the shelter puts the donated car to use within the organization, you can deduct the full fair-market value of the car. Say the charity takes your $9,500 car and uses it to pick up food donations from around town: You get a $9,500 deduction. You also get the full fair-market value if the charity sells it to someone at an intentionally reduced price as part of the charity's activities. For example, say the charity sells the same car to a homeless person for $1,000 so he can get to his job and back to the shelter: You also get the $9,500 deduction.
The IRS limits how much you can deduct each year for charitable donations depending on your adjusted gross income. As a charitable organization, a homeless shelter falls under the 50 percent limit, which means that your deduction can be as high as 50 percent of your adjusted gross income. However, if you're donating a car that's worth more than you paid for it, your deduction is limited to 30 percent of your adjusted gross income. For example, if you've got a classic car that you purchased for $4,000 years ago and is now worth $15,000, your deduction can't exceed 30 percent of your adjusted gross income. On the plus side, you can carry forward the excess for up to five years.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."