Many people ask “What kind of car donation tax credit can I get if I donate a car to charity?” Well, that depends on these three factors:
- What is your gross income? That’s the amount your employer gives you before any car donation tax credit or any other kind of tax credit.
- What tax bracket would you be in before and after you make your tax deductions? The larger the percentage, the more you’re saving in taxes from donating your car.
- How much is your car worth? This determines how much donating your car to charity will reduce your gross income by.
Let’s say you are single and make $30,000 after all tax deductions (except for your car donation tax credit). You pay 10% of the first $8,350 you make ($835) and 15% of the next $21,650 ($3,247.50). So you owe Uncle Sam $4,082.50 in taxes. ($835 + $3,247.50)
But say you donate your car to charity and you get a $5,000 tax deduction. Now your income is down to $25,000 ($30,000 – $5,000). You’re still paying $835 on that first $8,350 but now you’re only paying $2,497.50 in that next bracket because your vehicle donation reduced your taxable income. So you pay a total of $3,332.50 ($835 + $2,497.50) and save $750 because of your car donations tax deduction.
There’s many online companies that can work with you to make sure your car donation tax credit is as big as it can be. Plus, you’re doing a good thing for charity.