How To Donate Your Car

How To Donate Your Car

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Donating your vehicle to charity is a simple process, but one that most people do not fully understand. After all most companies require just a phone call to drive by in their tow truck and take away your clunker.

But to take the simple route would be doing yourself as well as any potential charity you donate to, a disservice. Whenever you are donating a vehicle, you should always consider who you are donating to and how to maximize your tax write off.

Picking up the phone and calling someone to pick up your car is easy, choosing the right charity and donating your vehicle the right way is not. That’s why our guide is here to show you how to donate your car.

Step 1. Locate charities in your area

There are several different kinds of programs that will accept your car as a donation. Unfortunately, the larger companies that run these programs are often intermediary companies, which do not actually help anyone. These companies are for profit, meaning the monies generated from your donated car isn’t always put to the best use.

When possible, avoid these organizations that will work to keep most of the money they make from your car. This is why it’s important to have a few charities in mind when you want to know how to donate your car.

There are also organizations that claim to have the ability to take donations, but are not 501 (c) compliant. Most of these for profit companies are governmental branches that lobby the government for the ability to take donations. Take the time to make sure that your beneficiary organization has 501 (c) (3) public charitable organization status.

Search for your charity here.

Step 2. Highlight charities you are interested in

donateIt always helps if you have a vested interest in a particular kind of charity. Whether you lost a loved one, or one particular organization’s mission strikes a personal chord, donating your car to a organization that you believe in should always be high in your selection process.

If you don’t have a preference, check with the charities on your list to see how much of your donation actually gets put into their work and how much is kept for profit. If there is a charity you find that handles the transaction directly, often times most if not all of the profits can be kept. Know how your car is being put to use, before donation.

Make sure that the charity you are donating to is registered and recognized by the IRS. Check the Cumulative List of Companies for a complete breakdown of qualified charities.

Religious organizations are not listed here, although they may qualify. For best results, check with the Better Business Bureau (BBB) or the BBB Wise Giving Alliance for a list of organizations that do the job correctly.

Step 3. Check with your accountant

If you don’t have one, take the time to check out the tax laws and the possible tax benefit for your charitable contribution. Understanding the tax laws will help aid you in determining the vehicle value and how to make sure you get your tax break.

Make sure that the non-profit organization you are donating to is a qualified 501(c)(3) institution that will ensure you get the proper compensation come tax time.

The IRS has begun cracking down on exactly how much you can write off from your donation. You can no longer just enter the vehicle’s value on a donated vehicle, instead the IRS has begun using the Fair Market Value (FMV) for benefits.

There can be a few exceptions to this rule, but they definitely aren’t the norm. In some cases, you can use the Kelley Blue Book value, or possibly a NADA guide but FMV is always the best guide to work from.

Step 4. Determine Value of your car

The value of your car means a lot to anyone who wants to know how to donate your car to charity. Most of the time you can simply deduct the sum that the charity sells the car for.

Ask the charity in question if you as a donor have any further responsibilities that you must complete to maximize your return.

Step 5. Stay Local

We realize it’s not always ideal for you to choose a local charity, what with all the national companies who are more than willing to take your car. But selecting a local charity makes sense on so many levels, that we never recommend picking a bigger national charity.

Further, these smaller charities are often easier to work with and can provide results in your immediate neighborhood that are impactful and you might be able to see. If your vehicle can still drive, this makes dropping off your vehicle easier since it saves the organization the cost of towing your vehicle to them.

Step 6. Get your Paperwork in order

This step in our how to donate your car guide could possibly be one of the most important. Without proper documentation, you are not going to get any kind of tax break. If it might take some time to get your paperwork in order, IRS publication 526 states that you must file a Form 4868 for a six month extension to file your return. If this step fails, you can file the return without claiming the donated vehicle deduction.

When your charity sends you the notification of receipt, you can then file a 1040X to claim the amount towards reducing your tax liability. For more information, check the IRS website on donating your vehicle, or check with your accountant.

Step 7. DMV

Just because you are donating your vehicle, that doesn’t change the fact that you must report it to DMV. When donating your car, you need to fulfill your state’s requirements by reporting your donation to DMV.

Some of the documents that you must take care of may include ;

Transfer of title : There are some charities who may request that you leave the assignment of your vehicle’s title blank. This can save the charity time and money so that they will not need to re-title the car. If you are doing this, make sure you receive a dated bill of sale so that you are not liable for whatever happens to the vehicle after you walk away.

Documentation : Understand that any car you donate that may be worth more than the standard $500 dollars, you must take the proper steps to ensure this is recorded. IRS Form 8283 should be affixed to your annual tax submission, this form will detail the amount of the vehicle donated.

Registration : Eliminating your registration is a vital part connected with transfer of title or release of liability. Depending on the state you live in, these steps may vary so check with your local authorities or DMV field office for more details. Cancelling your auto insurance is also another step you would be best served to complete.

Cancel your license plates – This step really varies depending on what state you live in or the state you are donating in. Some states still require that you surrender the vehicle plates to the DMV field office local to you.

Step 8 . Take your time and don’t be afraid to change your mind.

There’s a shocking amount of vehicles being donated by owners who think they are doing the right thing and helping the donation of their choosing. Sadly, most of these proceeds are being used for profit or scam artists who take your vehicle with no intention of helping the charity.

If you find yourself limited with the choices you have, and do not want to turn to a national organization or intermediary, don’t be afraid to change your mind. Often selling the vehicle to a private party and simply donating the monies is the best way to help the charity.

Have any questions about how to donate your car? Leave them for us below and don’t forget to check out the IRS’ guide on donating your car.

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