All You Need to Know Before You Donate a Car to Charity
The solicitation of used car donations has become an increasingly popular means of raising funds for charities. On the surface,
it seems like a win-win situation for the donor and the charity: a convenient and easy way of disposing of a used car while helping a cause.
Before donating a car to charity, however, there are some things that you should know about used car donation programs.
The donated car benefit to the charity can vary quite considerably depending on the arrangements. In some cases, the full amount of the vehicle donation goes to the organization if the charity sells the car itself or uses the vehicle to help fulfill some program services need. If a third-party broker is involved, however, the charity may receive only a percentage of the resale price of the car or it may receive a portion of what is left after all the expenses have been paid by the broker.
In some situations, the amount the charity receives from a third-party broker has no relationship to the re-sale price of the donated used car. The organization may receive a flat fee or a monthly agreed upon amount that is not dependent on the total dollar value of sales incurred by the used car fund raising company. Finding out the nature of the charity's financial relationship to the resale of the car is important, since a flat fee situation may result in making your used car donation ineligible for a tax deduction.
In order to take a tax deduction for donating a car, boat or other vehicle, there are a number of other things you should keep in mind.
» Verify that the recipient organization is a tax exempt charity.
» Locate a car donation charity with local or nationwide service.
» Make sure there are no hidden costs such as towing fees.
» Make sure the title of the automobile is transferred to the charity's name and keep a copy of this record.
» Find out how the charity financially benefits from the resale of the donated car.
» For tax records, take a photo of the donation vehicle and keep copies of current classified ads or guide value estimates for similar vehicles.
» If the car donation is worth more than $5,000, get a written professional appraisal.
Can My Car Be Donated to Charity?
Pretty much all vehicles are able to be donated. You can donate cars of any type, automobiles, pickup trucks, vans, RV's, motorcycles, buses, campers, utility trailers, bulldozers, road graders, backhoes, rock trucks, paving equipment, power boats, sail boats, yachts, planes and helicopters. What you will need is the title in order to prove that you are the owner of the vehicle. Obviously most people donate old car or used cars.
If the vehicle has sale value above the cost of towing it, organizations will usually take it. This includes vehicles that do not run or are missing parts. In this case, organizations will typically need to know what the status of the auto donation is so they can make a proper evaluation.
Donate to an IRS Registered Nonprofit Organization
Before you donate a car to charity, make sure that the car donation program you have chosen is a qualified, eligible, 501(c)3 IRS registered charity. If it is not a qualified organization, donating cars to them may not be tax deductible. If it were me, the last thing I would want would be to find out that a organization is not a registered nonprofit after I donate my car.
Those interested in donating a car can use the IRS Web site to check that an organization is qualified by searching Publication 78, which is an annual list of most organizations that are qualified to receive deductible contributions such as your vehicle.
Determining the value of the Used Car Donation
If the organization is a charity, you can deduct only the fair market value of your old car donation. In other words, this is the price the car would sell for today in its current condition. If the used car is not in good condition and needs significant repairs, don't believe promotional promises that claim you will be able to get "top value" for your used car donation based on one of the latest published guides that show the average regional prices for various donated cars. If you are claiming that the car is worth $5,000 or more, you will need to get an official outside appraisal in order to substantiate the claimed value for the IRS.
Also, if you are claiming a car donation of $500 or above, you will need to complete and attach IRS Form 8283 to your tax return. For your records, you also will need proof that you made a charitable gift. The best evidence is to transfer the title of the car to the charity and keep a copy of this document. This title change also will help you avoid potential problems that can occur if the car is somehow parked illegally by the organization or is involved in an accident or other mishap before the charity is able to resell the donated vehicle.
In the end, each case is different and is best advised by your tax consultant or accountant.
Why Donate a Car to Charity?
There are a number of reasons for donating a car to charity. Some want to be a blessing to others. Some just want a tax deduction. And others just need to get rid of that old eye sore parked on the front lawn.
For those who care about a cause, a donated car can go a long way to helping an organization meet needs. These goals include everything from schools, orphans, AIDs Care, and medical relief. There are also focuses on computer literacy, those who are physically challenged, drug awareness, emergency relief, education and food programs. Finally, there are services for education as well as food programs.
Some programs use donated cars directly by providing them to those who need a used car. Other organizations resell the donated car and use the proceeds to fund their activities.
A Quick Note About Car Donations
You can typically donate cars, automobiles, pickup trucks, vans, RV's, motorcycles, buses, campers, utility trailers, bulldozers, power and sail boats, yachts, planes and helicopters. People most often donate used cars.
The donated car benefit to the charity can vary quite considerably depending on the arrangements. In some cases, the full amount of the car goes to the organization if the charity sells the car itself or uses the vehicle to help fulfill some program services need. If a third-party broker is involved, however, the charity may receive only a percentage of the resale price of the car or it may receive a portion of what is left after all the expenses have been paid by the broker.