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Sunday, February 16, 2014

How to donate a car to charitable organizations

Car donations are intended to benefit those in need
Charity pays back dividends of a different kind
By Rebbecca W. Schwartz

Altruism is perhaps the hardest thing to do in this materialistic world. For example, donating a car to the Salvation Army, or any charitable organization for that matter can lead to numerous benefits to their causes, but is something that is fairly hard to do.

Aside from the usual tug-of-war between the self and selflessness, car donations in general are rigged with politics and too much bureaucracy that individuals find it easier to not do it anymore.

Making sure you donate your car to a 501C(3) nonprofit organization

The first thing that every car donor should do to make sure that the donation will be fully enjoyed by the target organization is to find an institution that will directly accept the car as a donation. This way, a person can ensure that the donation does not get lost in a sea of transactions and middlemen who will try to get cuts and milk the donation for all its worth. Make sure that the organization is classified as 501C(3) as they are the only nonprofit institutions that will be able to provide tax deductions in exchange for a donation. These pieces of information are generally available online.

Crossing your t's and dotting your i's

Secondly, a person should be able to protect himself or herself from potential liabilities which could come from the donation. This is particularly true for cases wherein the car was involved in an accident. To make sure that the title is transferred properly, one must check with the state’s agency that takes care of motor vehicles.

Finally, one must make sure that he or she fully understands the IRS system to make the used car donation a deductible act. For example, if the donated car is resold, the records of the resale price should be recorded.

Donating a car helps needy

Donating a car is extremely helpful to charities who devote large amounts of time to this type of donation. Once you find a reputable charity to work with, most charitable organizations will asist you in the completion of necessary IRS forms so that you can take the donation off your taxes in the proper way and save tax money.

Additional ways a charity may utlize your donated car

A charity may use a donated car as its own transportation or in its charitable work, but most cars are sold by the charity or a dealer to raise funds for the charity’s many projects. The donor’s tax deduction for the car is limited to the actual price that the car is sold for, even if it is as little as a flat $45.00.

Ask for a copy of the charity’s IRS letter of determination that verifies that it is eligible to receive contributions which are tax deductible. When you get a receipt, be aware that if the car is worth more than $500.00, you will have to attach Section A of IRS Form 8283 to your tax return, which contains a written acknowledgment within 30 days from the charity of the sales price of the car; or, if the car has not sold, how the charity plans to use the car and promising not to sell or transfer it.

An independent appraisal is needed if the car is worth $5,000.00 or more, and Section B of IRS Form 8283 must be filled out. If worth under $5,000.00 you can use the Hearst Black Book, the Kelley Blue Book, or a guide from the National Auto Dealers Association to determine the fair market value. Be aware that it is the obligation of the donor to have a true figure of the vehicle’s worth in order to avoid paying IRS penalties.

Find a charity that handles these donations themselves as it will be able to keep 100% of the profit. Intermediary organizations who advertise to help you handle the transaction often get to keep approximately 50% of the car’s value. If possible, drive the car to the charity yourself to avoid its having to pay for a pick-up or tow.

In the end, donating a car to the a any reputable non-profit organization is a selfless thing to do. However, one should be able to undergo the proper processes to avoid hassles in the future. 

Vehicle donations to non-proft organizations may qualify for tex benefits
Vehicle donations are used for IRS Schedule A itemized deductions

About the author: Rebbecca W. Schwartz is a professional photographer who also provides small business writing services to a we buy cars company based out of Michigan.

Image licenses: DepositPhotos, Standard License