How To Donate A Car To Charity – Properly.

Car donation has become a well known way of giving to charity whilst avoiding the usual hassle of trying to sell it and also getting yourself a good tax deduction at the same time.

Unfortunately the system has become so popular that everyone has tried to get in on the act and there are a vast amount of well meaning but profit taking middle men out there looking for a cut of your charitable donation, and at the same time there are also plenty of not so well meaning scammers out there too.

Alongside these potential pitfalls, there is then the tricky aspect of dealing with the paperwork with the IRS. This is not as difficult as it sounds, but you do need to make sure you get it right to ensure you receive the benefits to your tax bill. This is purely informational non-profit website set up following my own attempts to donate a car, and how to do it simply and easily. This website absolutely does not recommend any particular charity or car donation scheme – your choice of charity is entirely up to you.


Step One: Choose Your Charity.

Firstly make sure your charity accepts car donations, and if your normal charity does not accept car donations, search round until you find one that is comfortable with accepting vehicles. Ask what they will do with the car – are they a small local charity going to use the vehicle for deliveries or haulage, or are they going to sell the car and put the proceeds towards the charity? If they are going to sell the car, ask how and what percentage of the proceeds of the sale they will receive. Sometimes they use dealers or car auctions to dispose of the cars and may only receive either a flat fee (sometimes as little as $45) or only receive a small percentage of the proceeds – ideally they should be getting 100%.

Make sure also that the organisation is eligible to receive tax deductible contributions – if you are unsure ask for a copy sent to you of the charities ‘IRS Letter Of Determination’ which verifies its tax exempt status as an IRS approved 501(c)(3) organization. Your church, synagogue, mosque or temple likely qualifies. If you want to investigate them further then we’d suggest asking what percent of their proceeds fund their charitable programs, so you know they are putting your donation to good use. For further information on US Charities you can visit: Charity Navigator.



Step Two: Avoid Middlemen & Car Donation Oraganizations.

Plenty of companies have been set up to do this, advertising strongly on TV and the Internet and all take their own cut before the charity receives any money – they may make it easy for you and do the paperwork, but can take between 50 and 90% of the proceeds from the sale and pass very little on to the charity. If you absolutely have to use one of these organisations then do ask exactly how much of the proceeds the charity eventually receives, if it a simple flat fee of $50 or $100 for a used vehicle regardless of its value, or gives the charity a flat fee per month, then your donation may not be eligible for a tax deduction from the IRS.


Step Three: Transfer The Title Carefully

You do need to make sure you have a title for the vehicle in question, if not you can either visit the DMV or apply online for a new one, which will only cost a few dollars. Make sure you sign and date to release ownership of the car, and always fill in the name of the charity on the new owners section – and report the sale to your state’s DMV never leave the Title blank, as this could lead to parking tickets, speeding fines etc being run up in your name. Keep a copy of the title change for your own records and for the IRS.


Step Four: Get The Vehicle Valuation In Writing

You need an understanding of the IRS law for this bit – if the car is kept by the charity to use rather than sell, or if it is worth less than $500 then you can report its value to the IRS yourself, as a “Fair Market Value” based on listings from Kelley Blue Book or similar sources. If the car is worth over $500 then the IRS is going to want to see evidence of just how much the charity sold it for, so you will need a receipt from the charity to show how much you made and you cant claim a tax deduction without this. If the car is worth more than $5000 you must also get an outside appraisal alongside the receipt.


Step Five: Do The Paperwork.

If the charity received over $500 for the car then you must complete an IRS form 8283 along with an acknowledgement from the charity that the donation has taken place alongside a receipt for the amount the charity sold the car for. The charity must also provide documentation that the car was sold “at arms length” between unrelated parties. If the charity does not sell the car immediately, it must provide a receipt within 30 days of the sale.


Step Six: Further Reading

For the IRS complete guide to car donation you can download it here: IRS: A Donors guide To Car Donation.

source:car-donation-tips.com

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