It’s Never Been Easier to Donate a Car
Drivers with old vehicles sitting around have many options to clear up space in their driveways or garages. They could try to sell it via a private sale, but that means taking pictures, dealing with phone calls, and scheduling countless viewings from people only looking to take advantage of a possible deal. Of course, the hassle of trying to sell a car just may not be worth it for some.
Donating a car is often an overlooked option to get rid of that old rig. Many charities streamline the process of donating your car. Some will even pick it up from your residence, even if it doesn’t run. If, however, you want to claim a tax deduction whenever you donate a car, there are certain rules you must follow.
Read on to learn how to donate a car and benefit come tax time.
Vet Your Charity
While many charities and non-profit organizations would love to help you donate a car to them, only qualified entities are eligible for tax deductions. You want to look for an organization that is registered as a 501©(3) non-profit organization with the IRS. If you’re not sure if the group you are donating to meets this qualification, call the IRS hotline at 877-829-5500.
Of course, not all registered non-profits are created equally. Some organizations are vague about how they use donations. Programs from places like Kars4Kids, for example, have been under scrutiny recently for some misdeeds in their programs.
It’s a good idea to look at CharityWatch, an organization that evaluates charities, to vet your intended donation. According to CharityWatch, Kars4Kids spent more money on overhead than on actual charitable programs.
Make sure you are comfortable with the organization where you want to donate your car before handing over the keys.
Get The Right Documents
Picking a registered non-profit when you donate a car is just the first step to ensuring you get a tax deduction. The next step is to gather the right documentation.
If you believe that your car is worth more than $500, you’ll need a written receipt of the donation.
Your deduction will either be based on the fair market value of the car or the price the vehicle gets for sale. Fair market value looks at how much similar cars in similar conditions are worth. Websites like Kelley Blue Book and Edmunds can help determine these values.
When an organization sells a vehicle, you can claim the full amount of the sale. This is especially helpful if the organization repairs/restores the vehicle before putting it on the market.
Most reputable organizations will help you with the appropriate paperwork to ensure you get the right credit for your deduction. When you donate a car, it’s the least that they can do. If you’re still not sure how to get the most from this transaction, talk to your local tax professional to learn more.
