For older or non-running cars that are not worth a whole lot on the public market, donating a vehicle to charity allows its owner to do a small part to support the greater good as well as be eligible for a valuable tax deduction. Donating an unused vehicle to charity is not difficult, but make sure to go through all the steps one by one to avoid any problems with the IRS and to make sure your donation can be used for the maximum greater good.
Work Direct, Not With a Middleman
While plenty of good charities accept vehicle donations directly, an unscrupulous industry of middlemen has sprung up who advertise taking the leg work out of a vehicle donation. The problem is that this industry is loosely regulated and you cannot guarantee that middleman will not take a healthy cut of your donation’s value for himself. Work with a charity that has their own vehicle donation program to ensure that your donation is going to be used for their efforts, whether the car is sold or kept for their own operations, and its value will not be lining someone’s pockets instead.
The easiest way to make sure the charity you will be working with can be used as a tax write-off its to make sure it has 501(c)(3) tax-exempt status. Some charitable organizations that also do political lobbying work use a different tax-exempt status, but will not qualify for your own tax write-off if you donate a vehicle to them.
Obtain Fair Market Value For Your Car
The IRS advises using the Fair Market Value for your car as the only legal basis for how much you can write off on your taxes, which may be substantially less than the car’s Kelley Blue Book value. Fair Market Value approximates the amount the car would be worth sold at auction. You can verify this value with the charity when your car is eventually sold, or if the car is to be kept for internal use, you will need to calculate fair-market value the best you can at the time of donation.
Have Your Paperwork In Order
Donating a vehicle does require quite a bit of paperwork. If the charity you are working with does not allow you to sign over the title at the time of donation, find another charity, as you do not want to be liable for unpaid parking tickets or illegal actions the car is involved with down the road after it is sold. You also need to mark your donation on IRS tax form 1040 under non-monetary donations. If the car is valued at more than $500, you will need to fill out a separate form, Section A of Form 8283, and include that with your taxes. If the car is valued at more than $5,000 you must obtain a written appraisal of its value from a licensed appraiser, including that value with a signature from the charity on Section B of Form 8283 that goes in with your taxes.