Pin It

How to Donate a Car to Charity

Info_lover | May 3, 2010 |

0 Comments | Rating: 0

Would it not be great for you to know how to donate a car to your favorite charity to help the unfortunates? Through such a generous act, you can not only change your situation but also that of another individual. Every day, charities take the car you and other individuals donate and proceed to turn them into materials or money to channel into helping the unfortunate people.

When you learn how to donate your car to a charity, you can also learn how to donate a car for tax deduction. Years ago, you could deduct the fair market value of a used car from your taxable income. For example, you can get $250 off your tax bill if you are in the 25% tax bracket and have donated a car with a market value of $1,000. However, in present times, the amount of tax deduction you can get will ultimately depends on what the charity does when you donate a car to them. If the auto is sold by a non-profit organization, then the tax deduction will only be based on the amount of gross proceeds the charity got from the sale. Moreover, the donor will have to depend on the charity to inform him of the donation amount before the tax-filing deadline is up. While donating a car to charity can be more complicated these days, there are still plenty of ways you can use your car to help your favorite charity.

How to donate a car for maximum tax benefits

Luckily though, there are still situations in which you can get a full fair market value tax rebate when you figure out how to donate a car to charity. Do note that fair market value is not the same thing as blue book value. Fair market value is defined as the selling price for a car that is similar to your car with similar features and mileage. Chances are that the fair market value of your car is lower than the blue book value. To determine the fair market value of your car to be donated to charity, you can consider using the Edmunds True Value pricing calculator and then compare the pricing results with other cars of similar makeup in local classifieds.

Once you have determined the fair market value, you can then start comparing the car donation options available to you. You can maximize the tax deduction amount and fair market value if the charity keeps your car and uses it part of their charitable work rather than just simply selling it. An example will be the vehicle being used for pickups and deliveries in the non-profit organization. Also, another way on how to donate a car for maximum tax benefits will be to give them to a charity that in turn donates the used vehicles to the disadvantaged. One example will be 1-800-Charity-Cars which repairs and services donated cars and then in turn give them to people from lower income groups.

5 things you should consider when donating a car

Before you give your car over to anyone, be sure to read and follow the tips below to avoid making any mistakes:

Find a worthy charity of your gift. You can do some homework or research to find a reputable charity. You can do by looking at the online track records of charities at the Better Business Bureau website.
Find out the status of your intended recipient. In order for you to quality for a tax deduction, the charity must be an IRS-approved organization. You can visit the Internal Revenue Service department website and search for publication 78 to get a list of qualifying charities.
Avoid middlemen or intermediary organizations. There are many for-profit intermediary organizations that offer to help donate your car to charity. However, these middlemen usually keep about 60-70% of the vehicle's value for themselves and the charities and you will not get the full benefits as a result. To prevent such a situation from happening, it is best that you handpick the charity you want to work with directly.
Do the delivery of the vehicle on your own. Once you have identified a worthy charity, you should drop the car off by yourself so as to help you and the charity maximize the benefits of the donation.
Keep proper accounting. If the tax deduction amounts to more than $500, you will have to fill in an IRS form 8283 when you file your taxes. If the amount is more than $5000, then the documentation must include an outside appraisal. Proof of the donation will be required and can come in the form of a receipt from the charity.

Hopefully, this guide has come in handy for you and taught you how to donate a car to charity. It is definitely a cool thing to do a good feed and still be able to reap some benefits from such a kind act!