Have an Old Car? Get a Tax Break for It!
If you’re starting to have less space around your home, you may have considered getting rid of that old car, truck, or ATV that’s been sitting in your garage or driveway for years. Thankfully, there are multiple programs that can help you get rid of your unwanted or broken car. Plus, you could even take home cash or get a significant tax deduction.
When Should You Get Rid of a Vehicle?
It can be easy to simply hold onto a vehicle for years. However, each year of registration, whether active or non-operation, will cost you money with the DMV. Cars with significant amounts of rust can make great candidates for a car donation with tax benefits or even a statewide Cash for Clunkers reimbursement.
Cars needing extensive and expensive repairs can also make great candidates. If you haven’t been able to pass state inspection, such as in New York, you can still get tax benefits for your vehicle. When you donate your car, you won’t have to worry about making any repairs or conducting expensive maintenance.
Cash for Clunkers is Still In Effect
You heard that right. Although Cash for Clunkers has ended on a federal level, many states have taken the cash for clunkers program into their own hands. For instance, in California, it is still possible to get cash for your unwanted car. The state will pay you either $1,500 or $1,000 for your car (1).
The requirements for exchanging your car for cash with Cash for Clunkers varies. For instance, in California, your vehicle must fail a smog test on it’s own to qualify. Additionally, in order to receive your check, you will need to be able to drive the car to the junkyard. The car must also be able to start and move on its own power (1).
Although the program expects cars with damage to come in, there can not be any parts missing from the car. All the windows, fenders, and the hood must be on the car prior to you arriving to the junkyard. The car must also have at least 1 of the 2 bumpers. This means that choosing to part-out your car first is not an option if you want to receive a check for up to $1,500.
How much can you get with Cash for Clunkers? It depends on your state. For instance, in California, the base amount is $1,000 per car. However, if your income is below a certain level (225% of the poverty level), you can get more. For those that meet the income requirements, you can get $1,500 for your old car (1).
Donate Your Car for Tax Benefits
Donating your car outright to a local charity can give you significant tax benefits while saving you ample amounts of time. When you donate your old vehicle, you can get a tax deduction for the current taxable year. If your car was sold by the charity for less than $500, you are able to claim the fair market value of the car for the amount it sold for.
Unlike Cash for Clunkers, most charities will pick up your car right from your home and tow it away. You can donate your car for tax benefits even if it has not run in years. Typically, the charity will sell the car to raise proceeds for their cause.
However, a charity can also make good use of the vehicle themselves for the greater good. For instance, it is not uncommon for donated cars to be used to deliver meals to the elderly or to take people to doctor’s appointments. Some of the larger charities known for actually using donated vehicles include Goodwill and the Salvation Army (2).
Choosing to donate your car can help save you time and money. Unlike Cash for Clunkers, you wont need to worry about the parts that are on your car and if you can get your car running. It may not make sense to some to spend $600 in repairs and hours of time just to get a $1,000 check.
Additionally, when you donate your car, you won’t have to worry about finding a buyer, gathering all the documentation, and haggling about prices. The charity you choose will come with all the equipment needed to remove your car and give you back some much-needed space in your driveway or garage (2).
If you’re tired of looking at an old vehicle rot away in your driveway, you have some options. Giving your car away to charity can give you some great tax benefits, plus the feeling of knowing that your vehicle is going to good use in helping others. Even if you’ve misplaced the title to the vehicle, a charity will benefit from your used car greatly, all while giving you a healthy tax break for the year.
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