If you are thinking about making a car donation, remember to do your research first. Although donating your car gives you a tax break and charities assets to work with, it may not be as valuable as you think. For one thing, some car donation programs are for-profit businesses in disguise. Others have an arrangement with local dealerships in which they receive as little as $45 per car.

Although a car donation can be generous, depending on a particular charity’s arrangement, donating it may be the least efficient way to contribute. However, some charities do take steps to maximize their profits from car donations. That’s why you should look into a particular organization or arrangement before making your donation.

Donating your car to a charity allows that organization to do anything from supply needy families to sell it for profit. If you have a preference for your donated car’s purpose, you can start by researching charities dedicated to that goal. For example, there are charities created to provide donated cars to families who cannot afford one. The sections below describe how to select charities, how to donate your car and how to report your donation to the IRS.

Identifying Charities For Car Donation

If you’re planning on donating your car to charity, begin by doing research on where you want to donate it. You may have seen donation signs on highway billboards in the past. Do not call the first number you see requesting your donated vehicle — decide where you want your car to go first. If your car is still functional, consider reputable car donation charities that supplies families in need. For example, organizations like Vehicles for Veterans, 1-800-Charity Cars and Vehicles for Change make a direct donation. That means they do not sell the car for profit, but provide it directly to people who need cars.

If you’re planning a car donation for tax write-off purposes, this method may allow you to write off the full fair market value of the car. This is because the organization is dedicated to ensuring the vehicle is in good condition for use. As a result, that charity may even put in effort to refurbish the car before issuing it. Your vehicle’s value is maximized, and so is the write-off on your taxes.

On the other hand, car donation charities that sell or auction vehicles may only allow you to write off the revenue earned. In some cases, this can be less than $50. That means a vehicle worth several hundred dollars may turn into a small write-off of under $100 on your taxes.

If you want to donate your car to a specific charity that sells or auctions vehicles because you support its mission, do your research. Some charities may sell cars and receive competitive prices for them, making your car donation worthwhile.

For example, National Public Radio has a car donation program through their popular show, Car Talk. The Car Talk Vehicle Donation Program allows you to donate your car to your local NPR station. The station will then sell the car for an average 65 percent profit, making it one of the more efficient car donation programs nationally. Your local NPR station will receive the profits, and you get a tax write-off for the profit from your car donation. It will not be 100 percent of your vehicle’s value, but both you and your charity of choice will profit. Other organizations like Habitat for Humanity can average as much as an 80 percent return on vehicle donations.

However, depending on the arrangement, charities may receive only a small percentage of the car donation instead. Ask organizations what percentage of the profits they receive before making a selection. In the case that your charity of choice receives a flat or small fee in exchange for donated cars, reconsider your tactic. You may be better off selling the car yourself and donating the money directly. In many cases, the savings can be so great that both you and the charity will receive more money through this method. Contact your charity of choice and ask how their car donation program works before making your donation.

How to Donate Your Car to Charity

If you plan on donating your car to charity, make sure you do the necessary research first. Begin by selecting a non-profit organization to receive your vehicle. Double-check that the organization is a 501(c)(3) to ensure you do not accidentally donate to a for-profit organization disguising itself as a charity. Then, double-check that you are donating directly to the charity, and not an organization that operates as a middleman. This reduces profits both for the charity and for you. Therefore, contact the non-profit about car donations directly to minimize the chances of using a middleman or donating to a for-profit organization.

Once you have found a suitable charity, prepare your car for donation. This means removing all personal items, vacuuming and washing the vehicle. Additionally, prepare the vehicle’s title. If you do not transfer the car title in preparation for donation, the vehicle’s registration may remain unchanged even after it is sold. You may be held responsible for parking tickets, unpaid registration and other charges associated with the vehicle. If an organization tells you not to worry about a title or leave it blank, reconsider your donation.

You must fill out a vehicle title to properly make your donation. You may want to sit down with the organization to complete the car title transfer. Typically, you identify yourself as the seller, and the car donation charity as the buyer. Depending on the value of your car, you will also have to fill out particular IRS forms. For example, if your car is valued at more than $500, you should fill out and include Form 8283 Part A in your tax returns. If your car is valued at more than $5,000, you should fill out Part B of that form instead.

Before you donate your car, be sure to take pictures of the vehicle condition just in case you need to verify its value. Once you have submitted your car donation form and title paperwork, most car donation charities will pick the car up. This saves you the hassle of moving the car, particularly if it is a junk car. After the charity picks up your vehicle, wait for them to send you a tax deductible receipt. This receipt tells you what size deduction you can take on your taxes.

The receipt may not be prepared until the car is sold at auction. The IRS car donation rules say that you must use the fair market value of the vehicle to determine your tax write-off if it is donated to be used. Additionally, you must use the profit amount for your tax write-off if your vehicle is donated to be sold. The receipt allows you to determine the value of your tax write-off, so you should make sure you receive one.

Last updated on Friday, February 28 2020.