How to Donate a Car to Charity?

When you’re ready to donate a car, beware of opportunists and scams. Donating a car directly to the charity of your choice is recommended

One of the best ways to help out your favorite charity is to donate a car. Donating a used car can be beneficial to both you and the charity as it will often result in a good sized tax break for you and a reliable vehicle or cash windfall for the charity. While it can be a somewhat confusing process following these tips will help make you car donation go smoothly.

Choose Your Charity
If you already have a charity in mind it is best to verify their tax exempt status. In order to donate a vehicle to them and get the tax benefits the charity must be a registered IRS approved 501(c)(3) organization. Ask your charity to show their tax exempt paperwork. If you have not yet picked a charity you can have a look at IRS.gov for a listing of charities that meet the requirements.

Get Your Paperwork in Order
It is important to have your paperwork in order before donating a vehicle. You must have the title to your vehicle in order to legally transfer the vehicle to the charity. If you don’t have it or are not sure where it is you can get a copy from your local DMV. The IRS requires its fair share of paperwork as well. It is necessary to attach form 8283 to your return if the vehicle is worth more than $500.00. If the vehicle has a value above $5000 you need to provide the IRS with an appraisal of the vehicle to certify its value. No matter what the value of the vehicle, be sure to get a receipt from your charity.

Avoid Middlemen
There are all kinds of companies who will offer to help you donate your vehicle to charity. In order for the charity to get the greatest value from your gift avoid these middlemen and deal directly with the charity. The middleman company will often take 60 to 75 percent of the value of the gift. Most charities will be happy to deal with you directly and do anything they can to ensure the donation process goes smoothly.

Deliver the Vehicle
Avoid making the charity pick up the vehicle. If possible, deliver it yourself. The charity will more than likely have to pay someone to pick up your donation, which means they will not get the maxim value from your gift. It is also important to make sure the title has been legally transferred to the charity before giving them possession of the vehicle. Until the title is transferred you can still be responsible for any parking tickets that the vehicle may incur. The DMV can help with any questions regarding title transfer.

Keep Records
Make sure you keep records of the entire donation process. Keep the receipt and all tax forms somewhere safe so when tax season rolls around you have all of the documents you need. It is a good idea to take photos of the vehicle and any receipts for repairs that were done to the vehicle prior to the donation in case the IRS asks you to justify the donation value.

When Not to Donate: Car Charity Scams

Some of the “charities” that accept these vehicles are not quite on the level. Here are some common tip-offs to car donation charity scams.

Not a Real Charity
For some of these organizations, the problem is that there really isn’t any money going to a charitable cause. It ends up in the pockets of unscrupulous con artists. Check to make sure your charitable organization has a 503 or similar status, and that money gained by the proceeds from car donations actually goes to the people that the charity is intended to help.

Not an IRS Approved Charity
Not all charitable organizations can legitimately get a tax deduction for those who donate. Ask up front to be sure the charity you’re talking to is on the IRS approval list.

Big Promises
If you start hearing from a charitable organization that you’re guaranteed a certain amount for your tax deduction, look realistically at whether or not they will be able to get you the figures they’re declaring. Most people who are donating cars and other vehicles can only deduct a gross proceeds value, which is often below market value for a vehicle. Be sure to ask representatives how they will get you a gross proceeds amount that you can use in your tax return. They may not be able to tell you the exact amount, but they can tell you realistically a ballpark number to expect.

Misleading Information
Other organizations will try to deceive you about how you can deduct it on your tax return. The fact is that only individuals and households who do not take the standard tax reduction can claim a car donation amount for deduction from their taxes. If anyone tells you that you can always claim the deduction on top of a standard deduction, they’re not telling the truth, and it might not be a good place to donate your car.

Towing and Other Fees
A big red flag to stay away from is charitable organizations that make people pay fees to donate their car. These might be in the form of towing fees or other charges. Remember, car donation is an act that gives value to a receiving organization. If they want more than just your vehicle, they may be padding their pockets, or they may not be a legitimate charity organization at all.

The above are some of the warning signs and attributes of organizations that you may not want to donate to. Look for honest and professional nonprofits to successfully give your car over to charity.

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