When you have an old car trying to get rid of, donate to a charity is a good option. Instead of selling the car and pocket some cash, you can donate it to support your cause. Giving is typically satisfactory. But do you know not all the donations are made equal? If you do it correctly, you can maximize your support to your cause and get a handsome tax deduct. And if done incorrectly, you might end up with a parking ticket or IRS audit?

In this post, I am going to give you some tips on how to do the donation correctly.

1. Find a Right Charity

The first step is to find your charity that accept car donation and can get you tax deduction. Keywords here are “your charity”, “accept car donation” and “tax deduction”.

1.1 Find a charity for your cause

If you already have a favorite charity that you want to support. Go ahead with it. But if you are not sure which one to support to, you can find a best legitimate charity from Better Business Bureau (BBB) website http://www.bbb.org/us/charity/. They provide many information about the charity, such as their purpose, measurement of their governance, their financial and tax status, any complains have been filed, etc. Because it is pretty easy to obtain non-profit status in US, you want to find a solid partner to work with to make sure you donation goes to the right places.

1.2 Find a charity that accept Car donation

Not all charity accept car donation, the best way is to contact them by phone, email or go to their website to find out.

1.3 Find a charity that qualifies for tax deduction

If you care to receive tax deduction for your donation, then it is important to make sure that the charity is tax-exempt under section 501(c)(3) of the Internal Revenue Code.

If the charity you chose is listed in the BBB website above, you can find out from “tax status” section. Alternatively, you can also find out from “EO Select Check” tool on the IRS website or call IRS Customer Account Services at (877) 829-5500 (toll-free). Be sure to have the charity’s correct name. It is also helpful to know the charity’s address. Note that churches, synagogues, temples, and mosques may not be listed because they are not required to apply to the IRS for recognition of exemption status.

2. Donate Your Car To Maximize Your Support

 2.1 Donate directly to the charity if you can

Receiving material donation is always additional work for the charity. But if possible, try to donate directly to them. There are many companies offers to do the donation for you. But make sure to ask them how much they will take from the plate when they give it to the charity.

2.2 Drive it Yourself if you can

If the car is drivable and you are close to the charity, you might consider deliver the car yourself by driving it. It will avoid the trouble for the charity to arrange delivery.

3. Handle the Donation Paper Work to Avoid Trouble

3.1 Terminate your liability on the car

You would need to file a form to motor vehicle department stating that the car has been donated. Before donating the vehicle, you should remove the license plates, unless state law requires otherwise. If you don’t terminate properly, you would possible to pick up some parking ticket or caught in some other issues if the vehicle is involved in illegal activities.

3.2 Keep the paper work

The written acknowledgement from the charity is needed for your tax purpose. Based on the value range of your car (less than $500, between $500 to $5000, more than $5000), you might need to keep different document. You can find the details from IRS Publication 4303.

4. File You Tax Return Correctly

4.1 Determine the deduction amount

You need to understand where your donated car will go. If the car is sold in auction or wholesale, you can only deduct the amount that it is sold. There are several cases that you could deduct so called fair market value (FMV) in cases like:

  • The car is used by the charity, you need to get the certificate from the charity the duration of the use and statement that they won’t sell the car before the use is finished.
  • The charity intend to do improvement before sell the car.
  • The car is sold or give to needy person at price significantly lower than FMV.
  • The car is worth less than $500.

4.2 Itemize your deduction in 1040 and fill out Form 8283

If the value is less than $5000, fill out Section A of form 8283. If the value is larger than $5000, fill out section B of form 8283. You would need to combine other non-cash donation and use total value.

Hope it helps for your donation decision. Let us know if you have any comments.

How To Donate Your Car Correctly
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2 thoughts on “How To Donate Your Car Correctly

  • April 9, 2014 at 12:44 pm

    Nice advice, many times people don’t know the process to donate the car and they don’t have idea where to go for donation so they let their car stand as piece of scrap in garage and they don’t have any idea how much harm such cars can do to environment. Thanks for explaining.

    • April 9, 2014 at 2:06 pm

      Glad it helped.


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