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Car Donations and the New Tax Law

Here's What The New Tax Law Standard Deductions Are

The biggest change of the new tax law that affects car donations is the increase in the standard deduction amounts.

Form 1040 for itemized deductions.

 

The new standard deduction amounts increased. In 2019 the standard deduction is $12,200 for single filers and married filers filing separately, $24,400 for married filers filing jointly and $18,350 for heads of household.
In 2020 the standard deduction is $12,400 for single filers and married filers filing separately, $24,800 for married filers filing jointly and $18,650 for heads of household.

The 2018 major tax law made changes to the standard deduction which effectively raised the threshold for itemizing and since that time the amounts have increased. Car and other charitable donations treatment have not been changed in what is allowed, however to actually receive a financial benefit on your taxes after itemizing you will need to have more deductions now that the standard deduction has been increased.


You can only deduct a vehicle's fair market value on your tax return by following specific rules.

1

First you Must Itemize Your Return- Given the higher thresholds from the new tax law you may find it harder to have enough deductions when itemizing to gain an advantage over the standard deduction.

2

The Charity Must Qualify- For the donation to qualify as a tax deduction it needs to be made to a qualified charity, namely a 501(c)(3) organization as recognized by the IRS. Religious organizations are a special case. They do count as qualified organizations, but they aren't required to file for 501(c)(3) status.

3

Remember: Fair Market Value- Currently the IRS rules state you can only deduct a vehicle's fair market value under four specific conditions. The first is when a charity auctions the vehicle for $500 or less, you can claim the lower amount of either the fair market value or $500. The second is when the charity intends to use of the vehicle in its operations. The third is when the charity intends to make a material improvement to the vehicle, not just routine maintenance. And lastly, the charity gives or sells the vehicle to a needy individual at a price significantly below fair market value.

IRS Donor's Guide

calculatorThis is what the IRS says is Fair Market value.

Generally, fair market value is the price a willing buyer would pay and a willing seller would accept for the vehicle, when neither party is compelled to buy or sell, and both parties have reasonable knowledge of the relevant facts.
If you use a vehicle pricing guide to determine fair market value, be sure that the sales price listed is for a vehicle that is the same make, model, and year, sold in the same condition, and with the same or substantially similar options. IRS Publication 4303


Car Value

To come up with a fair market value on a vehicle there are several online resources that can be used. One such tool is
Edmunds Online Car Appraisal Tool.

For special situations, like a car that has significant damage or engine problems. you should talk with a professional. We do not value cars other than offer online information or tools, such as the one above.

For information about deduction values for 2018 taxes:
Donation Value Guide 2018