Answers to Tax Questions: Car Donation

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Have you ever considered donating an item to charity so you could get a tax deduction? Maybe clothes, toys, or even a car? One of our readers asked about it and now I’m going to share the detailed answer with everyone.

Question From Linda in Washington: I have 3 ‘junk’ cars I want to donate for the $500 tax deduction. Would I be able to do all 3 in the same year, or should I space them out? 


Yes, you can donate them all in one year. But first, you need to make sure that the donation is going to a real charity. They should be able to provide you with a receipt and proof that they are a legitimate charity.

Second, you need to check your prior tax return to see if you itemized deductions or took the standard deduction. If you don’t itemize, you can’t deduct the car donation. Wait until you can itemize before you donate. 

Next, before you decide when to make the donation, you might want to estimate your tax refund for the year based on what you already know. The best site for doing that is It’s completely free to use their tax refund estimator

My philosophy is that you only want to donate this year if it will help you get a bigger refund or reduce what you owe. Otherwise, save it for the next tax year. This will maximize your financial gain.

If you need more deductions to increase your expected refund or to reduce your tax liability then you definitely want to donate the cars this tax year (or clothes, toys, household items, etc.). If you don’t need more deductions, then save it until you do. As long as you donate the car by the last calendar day of the year, you can still count it on your tax return. The IRS has a special publication just for car donations if you want to read up on it.

But hold on…you don’t get $500 more in a refund just because you value the car donation at $500! The amount of additional refund you get is LESS than the donation value. Why? It’s because you are deducting the $500 from your income and your income is being taxed at a certain percentage.

For example, if you are in the 15% tax bracket and you deduct the $500 donation, this will represent an additional tax refund of 15%* $500 = $75 more refund. That’s pretty insignificant, right? Maybe you would be better off selling the cars for what you could get for parts. Can you get more than $75 by selling the parts of the car on Craigslist? Can you sell the car as is to someone who can fix it up? This is my recommendation. Sell the car for more than what you can get back on your tax return.

Do You Have a Tax or Budgeting Question? 

I worked as an accountant for years. Feel free to ask any question you like. Just reply to this email with your question and I will answer it in an email like this one. Plus, this coming tax season, I am planning to give tips to help you save a bundle of money by preparing your own tax return.

If you need help setting up a budget, click here.

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  • Reply
    kelly light
    July 17, 2017 at 3:09 am

    I am disabled and on social security, my husband is disabled but, fighting for social security benefits, he won a trip, do we have to file taxes (I normally dont)

    • Reply
      August 12, 2017 at 9:59 pm


  • Reply
    July 17, 2017 at 4:07 am

    My husband and I always have someone file our taxes for us. We feel this person knows the up to date tax laws. Do you think this is saving us or should we buy the online file documentation to file ourselves? If so what do you recommend and how do we begin?

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    I haven’t drawn my Federal Employees Retirement for 10 years, when I do, what is the lump sum IRS tax form I file for exemption?

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    July 17, 2017 at 1:44 pm

    How many years can you wait to file taxes for? Example, can I file last year and this year together?

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    July 17, 2017 at 3:26 pm

    If someone lives in a nursing home and they get Social Security Disability and they receive less than $13,000 per year, are they expected to file taxes?

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    angela meek
    July 17, 2017 at 4:22 pm

    I donate to local charities all the time. Usually clothing and household goods etc. Goodwill offers a receipt but most others don’t. Is there a way to claim those donations without an estimate/receipt??

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    My 19 year old is in college and we claim her as a dependent. She worked this summer and made about $1200. Do we claim that or does she do her own tax forms?

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    July 18, 2017 at 2:12 pm

    Being on a fixed income is hard what are some sure money saving tips?

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    July 19, 2017 at 9:32 am

    This is more a comment than a question. When you win a sweepstakes or giveaway and the sweeps company files a 1099 with the IRS- if they make a mistake & put the money amount in the wrong box the IRS will interpret that as self-employed income & will kick back your return saying you owe self-employment taxes. You must be able to prove the income was from a sweepstakes/giveaway.

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    July 19, 2017 at 10:45 am

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    July 20, 2017 at 10:49 am


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    July 21, 2017 at 11:41 am

    Is there anything i should know regarding taxes that are hidden from regular information provided?

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    I get emails that aren’t spam bc my clean virus thing deletes spam automatically and it says its possible that all the years I filed taxes that I didn’t get back my full amount and that I can check with the irs and get back money owed to me??? Is this true??

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    July 23, 2017 at 1:59 am

    As of today what is mot profitable investment ?

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    Ina Gribbins
    July 25, 2017 at 8:55 pm

    I am an older person and I think I can make as much money as I want and still keep my social security. My question is how does social security income affect your taxes if you work and still get to keep your social security? I guess the real question is does the social security make your taxes higher or does it not have anything to do with earned income I am confused about that….

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    July 25, 2017 at 9:22 pm

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    July 30, 2017 at 11:25 am

    when filing taxes do we have to reportall winnings big and small?

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    During retirement @ age 64 and 62 is it better to use cash savings or 401K earnings?

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    August 1, 2017 at 4:24 pm

    I mystery shop but make little money because I don’t put a lot of time in it so am I required to file or not?

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    I am currently on disability from ss. I receive benefits for my 2 minor children. How, if at all, will divorcing and having joint custody impact these benefits?

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    August 2, 2017 at 4:38 pm

    Hi there! My husband and I are recently married and in the middle of a strict 2-year plan to A. have a baby, B. get out of debt, and C. save cash for a downpayment for a house. My husband is totally on board with all of these goals, and understands the financial plan to achieve them. But, I find myself constantly saying “no, we can’t afford that right now”, or “remember our plan?” and he gets really frustrated. My question is, how do I keep reminding him that we are not getting any older, and we have a very realistic and possible goal, we just have to work hard and stick to the schedule?? Thank you!

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    August 3, 2017 at 8:28 am

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    August 3, 2017 at 10:35 am

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    August 4, 2017 at 2:23 pm

    I’m on a fixed, low income. I’m on disability. What are some of the best ways I can save money. I’m getting married next year and my fiancé and I need to both save and he doesn’t make much either. Any suggestions would be greatly appreciated on this blog or email me. Thank you.

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    August 5, 2017 at 5:03 pm

    what do I need to know when starting a small business?

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    August 7, 2017 at 5:35 am

    Is it ever possible to claim donations without having a receipt?

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    how long does it take to work for your 401k

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    August 11, 2017 at 11:13 am

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    August 13, 2017 at 6:17 am

    I have donated more than $500 in merchandise to various charities. Plus money to others. Can I only deduct $500?

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    August 17, 2017 at 2:52 am

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