How to Donate a Car to Charity
Have you got an old car that’s taking up space in the garage? Maybe you don’t want to go through the hassle of trying to fix it up and sell it. You’ve tried to give it to your kids but they would be embarrassed to drive it. How about donating your car to charity? There are many valid reasons for doing so:
Benefits of Donating A Car To Charity
- You can support a qualified charity of your choice.
- You can receive a tax deduction.
- It’s an easy way to get rid of an old, unwanted vehicle.
- You help the environment by removing an old vehicle from the highway that could potentially be emitting high emission levels. You also help the environment by contributing to recycling. Parts from salvaged cars that are not able to be reused are recycled. This means less landfill waste.
- You are helping to save the consumer money who might purchase the recycled parts.
Now that you’ve decided to donate your car to charity, you’re understandably confused about what steps are involved. It’s not as simple as picking an organization out of the phone book, handing over the keys and deducting the full market value on your tax return! Each state has a different set of regulations that must be followed.
In addition, the donation must be made to IRS qualified charities. There are also various forms that must be filled out and records that must be kept in order to qualify for a tax deduction.
7 Steps To Follow To Donate A Car To Charity
1. Pick the right charity.
If you would like to claim a deduction for donating your car to charity, then you definitely need to make sure that the charitable organization is really a qualified organization. If you don’t check and the organization your donating your car to turns out to be non-qualified, your donation won’t be tax deductible. Section 501(c)(3) organizations – educational, religious, and other charitable organizations – are by far, the most well-known kinds of qualified organizations. You can read more about how to verify that an organization is a qualified charity here. . .
2. Take the vehicle to the charity or arrange for pick up
Some charities will arrange to pick up a vehicles locally. Other organizations will want you to drop the vehicle off yourself. If your car is not running, there are organizations that can arrange for a tow but you might be charged a fee.
3. Get a receipt from the charity for the donation of your car
Acknowledgement for donated cars – if you are claiming a deduction of $250 or higher for the donate car, you will need to get a written acknowledgment from the charity. This acknowledgement can be either a paper copy or an electronic version such as an email that is addressed to the donor.
The acknowledgment of the donation from the charity must include the charitable organization’s name, the car’s description (not the value) as well as ONE of the following, as stated in IRS Publication 4303 – A Donor’s Guide To Car Donations:
- A statement that no goods or services were provided by the charity in return for the contribution, if that was the case.
- A description and good faith estimate of the value of goods or services, if any, that the charity provided in return for the contribution, or
- A statement that goods or services that the charity provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case.
Be aware that you must receive the acknowledgement from the charity on or before your tax return filing date, for the year in which you donated the car.
4. Transfer the title of your car
State charity officials usually will request that the donor transfer the title of the car to the charity. They also require that you generate a copy of the title transfer. You’ll also need to inform the state motor vehicle administration about the sale or transfer of the car by by updating your car registration information. However, this is not the case in all states.
5. Check to see if you qualify for a tax break
You can deduct the donation of your car to charity ONLY if you plan to itemize deductions on tax form 1040, Schedule A. Deductions of contribution of cars to charity have certain limitations. You can only deduct contributions to charity if they do not exceed 50% of your adjusted gross income. You can find more detailed information on deduction limits and how to claim deductions in Publication 526, Charitable Contributions.
6. Determine the value of your car
You (not the charity) will need to determine the fair market value of your car. This is the highest amount that you are allowed to deduct on your tax return. How do you determine fair market value? Fair market value is defined by the IRS as the price a willing buyer would pay and a willing seller would accept for the car, when neither party is compelled to buy or sell, and both parties have reasonable knowledge of the relevant facts. More detailed information on determining the value of your car can be found here in Publication 561, Determining the Value of Donated Property.
7. Keep Accurate Records
You must keep certain records and file an additional form (Form 8283, Noncash Charitable Contributions), with the IRS to back up your charitable deduction, if the amount you are claiming for the car you are donating is more than $500.
Depending on the size of the deduction you will need to keep the following records:
- Name and address of the charity
- The date the donation was made
- The place where the car was donated
- A description of the donated car
- A contemporaneous written acknowledgment from the charity where the car was donated
If you plan on donating a car to charity, I would strongly recommend that you read IRS Publication 403 – A Donor’s Guide To Car Donations. You’ll find a link to the publication here. . .irs qualified char
