About Tax Write-Offs for Donating a Used Vehicle

By Anton Behr

  • Overview

    There are lots of tax write-offs available, though some tax laws are a bit more complex than others. When it comes to writing off used vehicles, this topic is twofold. First, the reason for the write-off must be clarified. Second, the type of usage must be understood. In both instances, it is crucial that all tax laws concerning vehicles be carefully contemplated.
  • The Vehicle Write-off

    The most straightforward way of writing off a vehicle pertains only to small-business owners and contractors. If a vehicle (used or new) is used primarily for business purposes, then this vehicle can be written off. The percentage that can be written off will change according to the individual. If a vehicle (used or new) is solely used for driving to and from work, then this vehicle cannot be written off. The vehicle must be used for other work purposes in order to qualify for a write-off. Be sure that your vehicle actually qualifies as a business expense prior to writing it off on your taxes. When it comes to vehicle donations, a used vehicle may be written off depending upon the circumstance.
  • A Used-Vehicle Donation

    Prior to donating any vehicle, the correct IRS forms must be obtained. Additionally, a donor must obtain a written acknowledgment from a charity stating that a donation did take place. All of this paperwork must be sent to the IRS during tax time. The amount of money that can be deducted tax-wise has to do with the sale of the vehicle. The gross profit from the charity sale is the only amount that can be deducted. However, you do not have to wait until the vehicle is sold. Simply gain a written form from the charity regarding the sale of the vehicle for tax purposes.

  • Things to Consider

    Learning about various tax write-offs can benefit almost any tax payer. Still, it is wise to begin itemizing everything that you intend to write off well before tax time rolls around. Keep all receipts; write down everything that you use your vehicle for; and be sure to gain all the right paperwork before you start working on your taxes. While some people will never face a tax audit, those that are prepared to deal with an audit will have a much better chance at skipping a hefty fine. Even if you rely upon an accountant to handle all of your tax information, it is still advisable to hold onto every receipt and invoice.
  • Considerations

    While it is common knowledge that you are allowed to take the "fair market value" of a car as a deduction, many people attempted to deduct the "suggested retail price" instead. This price was significantly higher than the actual fair market value. Recently, the IRS has made changes to the tax code in order to curb this practice. Now, vehicles worth more than $500 equal a deduction of the "selling price" of the vehicle.
  • Warning

    Before deciding to deduct a used vehicle for any purpose, make sure to consult with a qualified tax attorney or accountant. There are lots of details and laws that are a part of any vehicle deduction, and these must all be taken into account in order to claim a vehicle in any manner. While a lot of tax laws may seem relatively straightforward, most of them are actually quite complex. In order to avoid an audit, take the time to find a reputable accountant. In most instances, there are more tax write-offs available than you may think. However, many of these cannot be known without professional help and guidance.
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