Did you know that automobiles are the number one recycled product in the USA? Approximately 10 million cars are recycled every year and from them, 14 million tons of steel is recycled.
Do you have an old car and don’t know what to do with it? Should you junk it or donate it to charity? Both options are a route to recycling. But which is the best financial choice?
There are some tax benefits if you donate old cars to charity, but you may get far more benefit from junking your car. It is a tricky decision, so here are a few points for you to consider.
Donate Old Cars to Charity
You have a choice. You can donate your car to charity and let them junk it, or you can junk it yourself and get paid by the junking company. If you donate your car, then you may write off the value from your tax return. If you junk your car, then you get the money, and you have to pay tax on that money because it is income.
With those points in mind, doesn’t it seem more profitable to donate your cars? In reality, if you sell your car off to be junked, you will receive far more than what you will write off your tax return. The reason for this is that government agencies are very aware of the charity donation scams that people pull. They claim that the car is worth $1000 in junk value when it is only worth $200.
Charities are going to value the car at a very low junk price partly because they do not want to be accused or found out as going along with the common over-valued car scam.
What About Donating Cars as a Tax Cheat?
There is a tax cheat where you claim for an over-valued car amount on your tax return. People donate their broken cars to charity and then claim the tax off their tax return using the Kelly Blue Book listing price on your car. In reality, the junk price of a car is far lower than the Kelly Blue Book listing, hence they are cheating on your taxes.
The IRS is wise to this trick. If your junk/broken car is donated to a charity, and you wish to claim $500 or more off your tax return because of it, then you have to get special accredited proof from the charity to back up your claim.
Charities are not in the habit of lying for you because they can be fined very large amounts if they are seen to participate in any form of fraud. According to TurboTax, you have to fill out extra paperwork if the car is donated and worth more than $500, and even more paperwork if your car is donated and worth $5000 or more.
Isn’t Donating a Car The Right Thing to Do?
Not to disparage charities, but there are certain unsavory elements within the car donation side of charity donations, which is one of the reasons why the IRS comes down so hard on it. You need to find out if how much of the money they make is put into administration. If it is more than 15%, then something isn’t right.
Secondly, some of your local charity offices will not have a tow truck or other means by which they dispose of cars. In these situations, they will use a third-party company to take your car, junk it, and then pay them money.
The money they receive is almost always a fraction of what you would have gotten if you were to have taken it to be junked yourself. In such scenarios, you would have been better junking the car yourself and donating the money to the charity.
How Do I Know If I Will Get a Good Price?
When you sell your car off to be junked, you are making it so your car will never be driven again. The junker has a legal obligation to ensure this and that it is melted down, stripped down, or its parts recycled. With that in mind, a junker has a fair amount to gain from this scenario, the only downside is that they cannot repair and sell the car for a profit.
The junker can make a lot of money from stripping down your car, and these days there are companies willing to pay good money for the scrap metal. Many times, it is possible to get more from junking a car than from selling it. Let’s say that your car is beaten up, but maybe it has another six months left in it before it becomes unsafe. There are many times when a junker will pay you more than somebody on eBay.
Plus, there is no need to accept the first price you see. You can shop around the internet for different quotes. See how much people are willing to pay to junk your car and see if they will pick it up free of charge. There are even websites that allow you to get an instant quote for your car by putting in the registration number.
Things such as the condition of your car are not really an issue because the car is going to be crushed, stripped, or recycled. At the most, they will probably only want to know if your car is a write-off because it has been in an accident, submerged in water, or burned.
Also, note that even if your car is broken, there are some junkers who will buy it with the expressed intention of fixing it up and selling it, in which case you may get an even better price.
Don’t forget to shop around because junkers range from awesome to atrocious; just check their Google reviews to see how good or bad they really are. Here is an article teaching you how to get the most money for your junked car.
Donating the Right Way
Donating your car means you can write the amount off your tax return, but you are likely to get more money if you junk the car yourself. Even though you are paying tax on the income you get from the junking company, you still come out on top in terms of how much money you receive.
In fact, if you want to get the biggest benefit while still giving to charity, then you should junk your car yourself and donate the proceeds. Then you can write off your donation on your tax return.
Junking Your Car Is Probably for the Best
In terms of financial benefit, you are probably going to get more from junking your car than you are from donating it to charity. This is especially true thanks to stringent rules about how much you can claim off your taxes regarding the value of your car; you often get far less off your taxes than you would if you sold your car off to be junked. You can donate old cars to charity and take a loss if you wish, especially if it is a charity that you admire, but if you are looking for a financial answer, then selling your car to a junker is the best choice.
If you are looking to learn more about car recycling, car selling, and car junking, then you should check out the other articles on our site. You can also get a free quote for your car.