your used vehicle is a noble action; you are helping charities raise funds for people in need or giving a car to a family who can't afford one. These benevolent feelings are only enriched by the tax benefits you receive from the effort and can make donating your car to charity seem like a no-brainer. The decision may be the easy part, but the actual donation and tax deductions can be a little trickier. With the following advice, we hope to make donating your used auto an easier process.
Do a quick Google search and you'll find there are many middleman companies that offer to aid you in your vehicle donation. These organizations will collect your car via pick-up services, sell it and then give the earnings to the charity of your choice. Use them if you want to lessen your time spent organizing the donation but be aware that they might take a percentage of the sell price - possibly up to 50% of the net profits - for themselves. To avoid this, a donation directly to the charity might be prudent.
By going through the charity's services, you will ensure your donation arrives safely and that they keep all the proceeds from the sale. A simple way to find out if your particular charity allows auto donations is to call them or to perform a search for 'donate vehicle' on their website.
The physical donation experience doesn't actually take very long. Once you decide who's getting the auto, you'll need to fill out any required forms and send them in via the company's preferred method. You'll then be contacted by the charity or the transportation service and will be able to arrange a convenient time for you to have your vehicle picked up.
At pick up time, you'll turn over your title. Make sure to get a receipt or you'll be kicking yourself come tax season. Luckily for some of you, your car does not have to be running for you to donate it. Though, similar to donating your clothes to Goodwill, the car must be whole, with potential usability - no missing engines or car doors. Sometimes charities or third party companies might make exceptions, but don't count on that.
The tax deduction part of the donation experience is slightly less pleasurable than watching your old car being towed away forever. As usual with the IRS, the tax benefit stipulations are somewhat convoluted, but the basic rule of thumb is this: the tax deduction is based on the selling price of your car at auction. This applies to cars that sell for over $500.
Imagine your car sells at auction for less than $500. You can then claim the value of the vehicle up to $499. If this occurs, make sure to get a written acknowledgment of the donation with the charity's name, a description of your vehicle and a statement that the donation wasn't in exchange for anything.
The general rule holds true except if the charity decides to fix up the car for use, drive the car before selling it or sell it under market value to a needy family. In these cases, you can deduct a fair market value for the car. This can be done by checking online pricing guides, such as the one on DriverSide.com
Say there's a lot of obvious repair work needed for the car, you'll then need to get rough estimates as to how much the repair work would cost and subtract it from the average sell price for your auto.
When you decide to donate your vehicle, remember that the little bit of time and paperwork will be worth it: you get a great tax deduction and a charity will get funds to help people who need it most.
Tips To Ensure A Smooth Donation
Check the value of your car beforehand:
This will help if the charity decides to use the car instead of selling it for proceeds. Review pricing guides but take into account any repairs that may need to be done on the car; these could substantially reduce your market price.
Chose a charity:
You may already know which one you want to help, if not, pick one that has a good background and one which is important to you.
Make sure the charity has tax-exempt status:
Check the IRS website or call 1-877-829-5500 for confirmation.
Check your title:
You must have a clear title in your name, if required by your home state.
Know your car's info:
You most likely will be asked your vehicle's make, model, Vehicle Identification Number (VIN#) and current mileage.
Get all your forms together
An auto donation requires some paperwork for both the charity and the IRS. You can get all the required forms on the charity's website or by calling them. As for the IRS, you'll need different forms
depending on the car's sell price.
Third Party Donation Sites
A Sample of Charities Participating in Vehicle Donation