Donating a vehicle to charity is a good way to help out a non-profit in the U.S., and it can provide a helpful tax deduction for the donor at the end of the year. There's plenty of commercials asking for charity auto donations, but which non-profit group should be chosen? How does the process really work? How much can be claimed on taxes?
How to Donate a Car to Charity
First, many charities will take any vehicle--cars, motorcycles, even boats. Some will even take vehicles that don't run and either fix them or sell them for parts. The charity will then sell the vehicles at auction to raise money. Occasionally a vehicle will be used by the organization if it's in good condition. Be aware, some charities sell for parts only, so if a car is in good running condition call first and find out if the car will be auctioned or sold for parts.
There are basically three steps to donating a vehicle to charity: find a reputable organization, transfer the vehicle's title, and follow up to make sure a receipt is issued after the vehicle is sold. After that, it's simply a matter of filing IRS Form 8283 and getting a deduction at tax time.
The Charity Navigator, a charity directory and rating organization, offers a Guide to Donating Your Car on its website. Here are the basic steps and suggestions the website offers when donating a car to charity:
- Before donating, call the organization and make sure the vehicle is going straight to them. Some charities take vehicle donations through middle men: for-profit companies that pick up a vehicle and charge charities 50 to 90% of the vehicle's value as a "service fee."
- Make sure the charity is a 501 (c)(3). Some organizations are 501 (c)(4)--that means the organization can lobby the government. 501 (c)(4) donations are not tax deductible. Make sure to verify the charity is a 501 (c)(3) to qualify for a tax deduction.
- Don't leave the title blank when the vehicle is picked up. Some charities ask for a blank title so the auction winner can register the car directly. It saves the charity from having to pay registration fees. But a blank title means the donor is still responsible for the vehicle until a new owner registers it. It's better to sign the title directly to the charity.
- Either drop off the vehicle or arrange for pick up.
- After the car is sold, the charity will send a receipt for the exact amount the vehicle was sold for. That's the amount the IRS will accept as a tax deduction.
- At tax time, file IRS Form 8283 to claim the deduction and hold on to the receipt.
Donate Car = Tax Write-off
The tax regulations regarding vehicle donations changed in 2005 because of the American Jobs Creation Act of 2004. Previously, a donor could simply declare the fair market value of a vehicle and claim the full amount on the year's taxes. Not so anymore. Now the charity must issue a receipt for the actual auction price, and that's the amount that can be claimed. There are a few exceptions to this, for example if the car is worth less than $500 or if the charity keeps the car for use, but these are uncommon circumstances.
Donating a vehicle to charity is simple. The most difficult part is deciding which charity to donate to. When looking, do a little bit of research to make sure the proceeds of the vehicle sale will be put to good use. Once a charity is chosen, groups like Charity Navigator or the American Institute of Philanthropy provide free online charity analysis to find out where a charity's proceeds really end up. Donating a car or other vehicle to charity not only provides support to worthy causes, it also nets a nice tax deduction at the end of the year.
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