Cash for Clunkers

Tara Hornor
Written byTara HornorUpdated - October 19, 2023
Tara Hornor
Tara Hornor

Tara Hornor is an experienced writer and entrepreneur with over two decades of experien... | See full bio

John Rush
Edited and Fact-Checked byJohn RushEditor
John Rush
John Rush
Automotive Content Accuracy Auditor|||

With over four decades of experience, John Rush is a highly accomplished business owner... | See full bio

Should I Donate a Vehicle for Cash to Give to Charity?

Do you have an old vehicle sitting around and collecting dust or taking up space that could be put to better use? Want to make a difference? Put it to good use and donate the car for cash to benefit your favorite charity! The following are your options:

  • Donate a car directly to a charity, OR
  • Sell your car and contribute the cash to a charity.

If you choose the money donation route, all you have to do is sell off the car and donate the proceeds. But then again, it isn’t as easy as it sounds. Selling a car can be a hassle and takes time too. can help make it easier for you, though, as they give cash for clunker cars in just minutes, provide a free tow, and pick up the vehicle within a day or two.

But sometimes it can be just as impactful to directly donate a vehicle for cash deductions for you and an actual vehicle for your charity. There are benefits for both you and the charity to consider when taking this route.

Tax Considerations When Donating a Junk Car


When considering if you want to donate junk cars for cash deductions, you’ll want to keep some important tax considerations in mind so that both you and your charity get the most out of your donation.

Returns have to be itemized

All charities don’t qualify when it comes to claiming tax deductions. A qualified charity should be recognized by the IRS as a 501(c)(3) organization. Remember that religious organizations are qualified organizations, despite not having to file for 501(c)(3) status. You can visit the IRS exempt organizations site to find out if a particular charity is qualified, or call the toll-free IRS number for more details.

If you wish to reduce your federal income taxes by claiming a vehicle donation, the deductions have to be itemized. For instance, if you are in the 28% tax bracket and the allowable deduction for the vehicle donation is $1,000, it saves you around $280 in taxes.

The individual and married tax deduction has been increased to $12,400 and $24,800 respectively, so it doesn’t make much sense to itemize your deduction unless you have many other deductions. Unless the charity uses it directly, the value of tax rebate is usually capped at $500.

If the vehicle donation is your only deduction, it is likely that taking a standard deduction would save you thousands of dollars in taxes. The best way that donating a junk car gives you any tax benefit is if you have multiple deductions, and the total (including the car), is more than the standard deduction. Moreover, you can always donate as much as you want to charities, but the IRS limits how much you can claim on your tax return, so work out the figures beforehand.

Conditions for claiming tax deductions

Fair market value is defined by the IRS as “the price a willing buyer would pay and a willing seller would accept for the vehicle, when neither party is compelled to buy or sell and both parties have reasonable knowledge of the relevant facts.” This means that the buyer or seller can’t be an auto dealer – they have to be private parties. Under the current IRS rules, a vehicle’s fair market value can be deducted as per the following:

  • When a charity auctions your vehicle for $500 or less, you can claim either the fair market value or $500, whichever is less.
  • The value can be deducted if the charity wants to use it for work purposes, which means “significant intervening use of the vehicle.”
  • Deduction of fair market value is applicable if the charity makes a “material improvement” to the vehicle (this doesn’t mean just routine maintenance).
  • The fair market value deduction can be claimed if the charity sells the vehicle to another individual at a price significantly below fair market value.

Finding out fair market value

There are quite a few online calculators that can help determine your vehicle’s fair market value – all you have to do is enter the year, make and model, along with other information like mileage, trim level, and condition.

Just keep in mind that if you use a vehicle pricing guide to determine fair market value, please make sure that the sales price listed is for a vehicle that is the same make, model, and year, sold in the same condition, and with the same or substantially similar options or accessories as your vehicle (as cautioned by the IRS).

It is unrealistic that your vehicle will meet one of the stringent fair market value requirements, so it’s better to go with the lower suggested value if in doubt.

Only a small percentage of donated vehicles are deemed suitable for use by charity recipients. About a third of donated vehicles are junked, and the rest are auctioned off. To ensure you get fair market value, the vehicle needs to be in good or excellent condition, or else it is likely to be sold off at an auction or scrap yard. If that happens, the deduction is based on the car’s selling price, instead of the estimate of its fair market value.

This price isn’t necessarily something you will know when you donate a vehicle for cash deductions, or even before it is time to file taxes next time, since an organization has up to three years to sell your car.

Paperwork is vital

Paperwork Needed to Donate a Car

Once you hand off the car to the charity, get a written receipt immediately.

Depending on what the charity does with the vehicle, you get a written acknowledgement or Form 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes) at some point.

Don’t misplace this document, as the information could be required while filing taxes and you might have to send the document to the IRS if the tax deduction is more than $500. If you donate a vehicle for cash worth more than $5000 to charity but they don’t plan to sell it for cash, an official written appraisal at least 60 days before you donate the car is a must.

Generally most charities sell off the cars that are donated to them, as they are always in need of money. In those situations, you can deduct the car’s final selling price, which the charity provides with a written acknowledgement or Form 1098-C. The documents you have to file with your tax return are listed below:

  • $500 or less – not enough to worry about but you should still keep the records handy in case you are audited.
  • $501 to $5,000 – File Form 1098-C or the written acknowledgement, along with Section A of Form 8283.
  • More than $5,000 – File Form 1098-C or the written acknowledgement, along with Section B of Form 8283 and the written appraisal of the vehicle if the charity isn’t selling it.

What are the advantages of donating a junk car?


Make, model, and condition of the car doesn’t matter

Depending on what the charity requires and the type of vehicle you have, the charity might use the car themselves, sell it to another individual at a reduced price, auction it off for money, or sell it to a salvage yard. The best part is that most charities will take any car – even if it isn’t in a drivable condition. Dealers or private buyers might not take just about any vehicle, especially if it isn’t running.

They take it off your hands

When you donate junk cars for cash or use to an organization, they will often tow them away (if they are too old to run on their own), totally free of cost. The process is simple – you have to call the charity of your choice, work out the basics, and then someone will come to pick up the car at your house.

You get tax benefits

When donating a junk car to a charity, you get tax benefits, as mentioned above. All you have to do is secure documentation from the charity to prove you transferred the title to them and that they have accepted the donation.

The “feel good” factor

Between the tax benefits, getting an old car off your property, and knowing that you’ve helped a good cause, donating a junk car simply feels good. Don’t take this lightly. Even if you don’t qualify for a tax deduction, you can still feel good when you donate junk cars for cash because charities will benefit. It is a great way to clear out some space and help people at the same time.

What are the drawbacks of donating a junk car?


Reaping tax benefits requires patience

While it sounds great to hear that you will get tax benefits, it can be a hassle to actually reap them. The paperwork can be complex and time consuming. You have to select the right charity, figure out fair market value of the car, know how the charity will use your vehicle, acquire a Form 1098-C, and go through IRS publications in detail. But your patience does pay off in the end!

The deduction isn’t that much

Did you know that charities often sell cars at auctions for as little as $50? So the deduction might not be much at all. You won’t be able to deduct its full value for tax reasons, unless the car is used by the charity, instead of being sold for a profit. At most, you can deduct a few hundred dollars. If your car is sold for under $500, you can either deduct $500 or the fair market value, whichever is less.

What are the advantages of selling a car for cash?


Fast and easy cash in hand (in some cases)

As is evident, when you sell a car, you get the money immediately. It is a clear, hassle-free transaction – you sell the car privately or to a dealer and get the cash that you can then donate to your charity of choice. You won’t have to wait until tax time to reap the benefits. However, some cars are just not in great condition; junk cars can be tedious and frustrating to sell.

You might have more to donate

If you sell a car instead of donating a junk car, you could have more cash in hand. This means you can donate more actual cash to a charity of your choice as opposed to the limited amount a charity might get from auctioning your donated junk car. 

Both donation choices — sell the car to give money or directly donate the vehicle for cash or use — are legitimate options. Just take into consideration the condition of your car, taxes, and the needs of your favorite charity before deciding if you want to donate a car for cash deductions or sell the car for a direct money donation.

We may earn a commission if you make a purchase through the provided links.


What are the disadvantages of selling car?


Time consuming process

The average time it takes a private seller to sell a vehicle is two months, meaning it could be a very time consuming process. If you wish to get rid of a particular vehicle, and not trade it in, this process can be problematic. Especially if your car is a bit rough… okay lets be honest! If it’s a junk car you will have a long process ahead of you. Fortunately, there are programs like Cash for Clunkers that help you quickly and easily sell that unwanted vehicle.

Dealers or private buyers might not take every car

As mentioned, you can’t sell off cars that are in an old and dilapidated condition because most dealers and buyers won’t take them (they typically want cars that at least run or might run if they are repaired).

Thus, you can weigh the pros and cons and then decide which option is best suited for you. However, donating requires less effort as you simply contact the charity and they take vehicle off your hands free of charge.


Tips to keep in mind while donating your car

The easiest way to donate a vehicle is to just get in touch with a credible charity, arrange a convenient time so they can come to your home and pick it up. It is a pretty straightforward process, and generally safe. But it is imperative to exercise caution so you aren’t held liable for anything that happens with your car after it is donated.

  • It is advisable to stay away from organizations that make exceptional promises such as telling you about exorbitant tax deductions.
  • As mentioned, get a receipt after the donation and hang on to it.
  • Once you are done driving the vehicle, remove the license plates from it.
  • File a transfer form to sign over your title with your state’s transportation or motor vehicle agency.

Remember that the tax deductions are controlled by the IRS, so you have to meet certain criteria in order to avail the deduction. But even if the process seems a tad tedious, it is worth it in the end, as you get to help people, and get rid of a junker that was just cluttering up space in your garage.

Carefully review the steps mentioned, consult with a tax advisor, and then make an informed decision.





How it Works!

Verified by

This website uses cookies to ensure you get the best experience on our website.