Perspective

Could giving away your old car give you a tax break?

February 26, 2020 by PEMCO Insurance

If you replaced your old car in 2019 and, instead of selling it or trading it in, you gave it to a charity, thank you for making the world a more generous place! Now, you might be wondering if Uncle Sam feels as good about your decision as you do.

You CAN reap tax advantages by giving away a car, but you need to know which questions to ask your tax adviser, including:

  • Is the organization an IRS-recognized charity? If so, you could get a tax break, but only if you itemize rather than taking the standard deduction.
  • Do I claim fair market value or sale price? This one gets tricky and may be different from what you remember if you donated a car in years past. Most often, you'll claim the sale price the charity gets for the car at auction, which is likely less than its fair market value. If the charity hasn't sold the car before your tax-filing deadline (so you don't know the amount) you can file your taxes without the deduction and correct it later with an amended tax return. There are a handful of exceptions to the sale-price vs. market-value rule, so it pays to ask.
  • What forms do I need to fill out? That can vary. Keep all donation paperwork and show it to your tax adviser.

And a couple more tips:

  • If you haven't done it already, protect yourself from unwanted surprises like unpaid parking tickets and tolls by reporting your car's sale – or in this case, donation – to the state (Oregon, Washington). That ensures you're no longer held responsible for anything associated with your old car or its license plate.
  • The sooner you file your taxes, the harder it is for an identity thief to lay claim to your refund. If you ever suspect your identity may have been compromised, let us know and we'll connect you with PEMCO ID Smart, free identity theft help for you and family members living in your household.  

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