You have two choices when your car is getting old: to donate or sell a car. While donating your car is a meaningful cause, you need to be sure that you are clear in your mind about everything. Donating your car, opposite to the common belief, does not bring in huge tax deductions. But it’s the way that you feel after donating that matters. But if it is money that you have in mind, then we advise you to sell your car.
So, let’s see what are the pros and cons of donating and selling your car separately.
Pros of donating your car
Here are a few pros of donating your car.
#1: Positive Community Impact
Donating a car is a big help to the community and has a significant positive impact. A charity can benefit by either selling it or using it for their own purposes.
For example, NGOs like Wheels For Wishes help make a critically ill child’s wish come true. You can choose your own cause and the impact you want to make.
#2: Feel Elated
Giving makes you happier than receiving. You will definitely have that elated feeling you always have when you do something generous.
#3: Eligible for a tax deduction
The government recognizes the positive impact you are trying to make on the community. Thus, they reward you with tax deductions.
You get a tax deduction equal to the selling amount of the car. And if the selling amount is less than $500, you can claim either $500 or the car’s fair market value, whichever is less. Great, isn’t it?
It has been seen that most owners think of donating or selling a car when it is nearing death. At such times, contributing to an NGO is the right decision because they accept any condition car. They will even tow your car for free if it is not in running condition.
And all of this process is hassle-free. You do not need to search for a buyer, only call an NGO of your choice, and you are done.
Cons of donating your car
Here are a few cons of donating your car. Keep them in mind when you decide whether to donate or sell a car.
#1: Tax deduction might be less than the actual sale value
The deduction you get for donating your vehicle is the amount of money they sold your car for and not the car’s fair market value. Though there are conditions when you can get the FMV of your car, the chances are slim.
#2: You need to itemize your taxes for reaping the tax benefits
The second issue with donating your car is that you cannot reap many benefits by the standard deduction. You will need to itemize your taxes to reap the tax deductions.
#3: Reaping the tax benefit can be a hassle:
While donating a car is easy, filing for the tax deduction may be quite a hassle. You have to find out the FMV of your car and then dig out what your charity will do of the vehicle. Lastly, fill out the required forms and skim through the IRS Publication 78.
Sounds challenging, right? But where there is a will, there is a way. So, there are many charities that handle all the paperwork for you, and you can skip all this stress.
Pros of Selling a Car
Next, in our guide on whether to donate or sell a car, we have pros of selling a car.
#1: You get a higher return
If the amount of money you get from your car matters to you, it is better to sell it. Because the tax deduction you get from donating your car is usually less than what you can earn by selling it.
The reason behind this is that you can get a tax deduction only equal to the selling price of your car and not the FMV of your car.
Lastly, you do not need to wait till the tax filing. You get your money instantly.
#2: You may still make an impact
If you want, you can still donate some or the whole amount from your car sell to the charity of your choice.
But the catch here is when you donate your car, you still get money back as a tax deduction. But in this method, you part with your share of the money. There is no parallel input.
Cons of selling a car
#1: It is a hassle
Selling a car is definitely going to fetch you a larger sum of money. But, it also demands time and effort. On average, selling your car takes about two months.
Plus, it requires a lot of hard work. You will have to find a buyer, close the deal, do the paperwork, etc.
Also, you may need to clean and repair your car to sell it.
Thus, if you are not exchanging your car for another, there is not much sense in selling it.
What is better: Donate or Sell A Car?
According to us, both are equally good. It just narrows down to what is going on inside your mind. Donate your car if you are feeling altruistic and sell if you would better like the money in exchange for it.
If you decide to donate your car, then you are definitely making a positive impact on the society. But at a cost to yourself because you will not get the fair market value of your car. However, you must be happy about the noble gesture you made.
On the other hand, if you decide to sell your car, you entitle yourself to a higher return. But the process is a hassle. You have to find a buyer and then negotiate a deal, do the paperwork, etc. While charities often handle the paperwork if you decide to go down the donation road.
So, this was all in our guide on whether to donate or sell a car. We hope it gave you a bit of clarity, and you can now make an informed choice. And if you still have any doubts, please drop them below in the comments section. We will be glad to answer.