How to Donate Your Car
Cars aren’t exactly the kind of thing you throw in a trash can. Having an unused car hanging around in your garage is not just an eyesore; it’s also a wasted opportunity for other people to benefit from, especially if the car still works. Here’s how you can donate your car.
Why Should You Donate?
When you donate a car, you don’t just bypass the hassle of looking for a buyer that will never come, but you can also get the following:
No good deed goes unrewarded, and donating your credited charitable organizations can lead to a tax cut on your part.
You can even donate cars that aren’t working anymore.
Depending on where you donate your car, your vehicle can be taken within a day or two of your donation, without any extra cost on your part.
A donated car can also be auctioned, which part of the proceeds will go to you or your charity of choice.
How Donation Works
Donating a car isn’t as easy as donating clothes, especially if you’re looking for a tax break! Keep in mind that you have very specific system to follow, although you can always ask for assistance from either the IRS or your charity where your car will be donated.
Choose a charity of your choice, preferably one that charges a removal fee of a little to none. One example of a car donation charity is Good News Garage, which repairs cars to offer them to working low-income families to be used once again. Make sure that your charity of choice is a qualified and registered charity-otherwise you will get no tax benefit at all. To check, you can consult the IRS or its equivalent in your country.
Your car will only be considered a qualified car if it has been manufactured to be used as transportation. Cars that have been purchased for sale do not qualify. For example, if you are a car dealer and a particular car that you’ve been selling will be donated instead, this will not qualify for a tax cut, as it has been originally been meant to be sold.
Determine the fair market value of your car. Fair market value means the value of your property in an open market. You can determine the fair market value of your car by consulting with the charity’s management to help determine the estimated sale value of the car, or what they think how much someone will be willing to buy it. Consider the factors that may drive the prices up or down. For example, the car’s years of use may drive the price down, but having newly-replaced parts may drive the price back up.
Keep in mind that you are still responsible for determining the fair market value of your own car. However, if the car is worth $5,000 or more, it should be professionally appraised.
Take pictures of the exterior and interior of the car you’re about to donate. Save the charity’s acknowledgment receipt and any documentation regarding your car donation. This will help you back up your charitable documentation once you file a tax return.
Get the tax receipt. A tax receipt is the paid tax notice, and will flag down the items that call for a tax deduction. Make sure that the charity’s name, federal tax ID number, your name, the date and year of the donation, make and model of the car are all included.
Make sure that you notify the DMV and your insurance company that you no longer are the owner nor the insurer of the donated car. Follow your state’s transfer regulations for the car’s titles and plates. Keep the tax receipt and the completed IRS Form filed away for documentation and tax purposes.
Some charitable organizations also offer other incentives for your car donations, such as free vacation certificates. Check up on the charity if they’re ready to distribute your freebies, if there are any.