Giving Tuesday, the first Tuesday after Thanksgiving, was created in 2012 to encourage people to do some good by, say, volunteering or giving to charity. If you own a car that you don’t need and you have a tax bill you’d like to reduce, consider doing good by donating your car to charity. You’ll get extra space in your garage and a tax deduction, too.
As with all things taxable, charitable auto donations are somewhat complicated. You’ll need to be sure that you can, in fact, deduct your donation from your income at tax time. You’ll also have to figure out the value of the car and, in some cases, provide an appraisal.
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The standard deduction
Tax law has nothing against donating cars, boats or even dump trucks to charity, and many charitable causes will accept cars and other motor vehicles as a donation. Some will even tow them away for you.
The main problem with claiming a deduction for a donated car is overcoming the standard deduction. Everyone gets a standard deduction, and it’s a whopper: $25,900 for joint filers, $19,400 for heads of household and $12,950 for single filers and those married filing separately for the 2022 tax year. Taxpayers who are 65 or older or blind can add on another $1,400 ($1,750 if filing as single or head of household).
The standard deduction will be even bigger in 2023, because it’s adjusted for inflation. The standard deduction for married couples filing jointly for tax year 2023 rises to $27,700; for single taxpayers and married taxpayers filing separately, it will be $13,850.
A big standard deduction is a good thing because it reduces your taxable income, which trims your tax bill. But 90 percent of taxpayers don’t have enough deductions to get more than the standard deduction.
Consider a married couple in 2022 who have $6,000 in other deductions. If they donate a car worth $4,000, they will have $10,000 of deductions, which is great, but far less than the standard deduction for joint filers. They would be better off taking the much larger standard deduction and be content with a little extra garage space.
How much is it worth?
Let’s say, however, that you expect to have enough in medical expenses, state and local taxes, and other charitable donations to make itemizing worthwhile. In this case, you’ll need to put a price tag on the car for tax purposes.