How to Find the Best Charities for Vehicle Donation

It is a thoughtful and generous move to donate your car to charity. It also has the potential to save you money on taxes. Many non-profit organizations that accept automotive contributions heavily publicize it, but completing your homework before handing over your keys is essential. Here’s what you should know if you want to give your car to the greatest organizations.

IRS Procedures

Before donating your car, you should be aware of the common guidelines regarding charitable donations. Taxpayers can only deduct a car contribution if they itemize their deductions. Deductions for charitable contributions are also restricted. Your contribution cannot be more than 50% of your adjusted gross income.

In addition to these broad criteria, the IRS has tax restrictions governing how much you can deduct for donating a vehicle. You can and should read the IRS guidelines, but the general rules are as follows: 

  • You can deduct the gross proceeds of the sale if the charity sells your car.
  • If the vehicle sells for less than $500, you can deduct the lesser of the car’s fair market value (on the day you donated it) or $500.
  • If the charity intends to make upgrades to the car first, you can deduct the car’s fair market value on the date you donated it.
  • If the charity intends to utilize it for charitable reasons, such as delivering meals to the elderly, you can deduct the car’s fair market value once again.

Aside from these basic rules, the IRS book has detailed information on estimating the vehicle’s fair market value. 

If your tax situation is complicated, as usual, consider consulting with a tax prep firm or a financial counselor that specializes in tax concerns.

Non-Profit Organizations That Accept Car Donations 

Some charities promote the fact that they accept car donations on television and radio. However, these are not the only charities that accept used automobile donations; in fact, a wide range of charities will accept car donations. Keeping this in mind, a good place to start may be to look for charities with noble goals (and impeccable reputations) and to check their websites to see if they take car donations. Vehicles may be accepted by groups that you already support through more traditional donations.

Some will use your car directly, such as a charity that delivers food to the poor or destitute. Understand, however, that most organizations will not use your vehicle. They will instead sell it and utilize the revenues to fund their programs.

While some charities work as a third party for other non-profits, it is advised to avoid those organizations. When you donate directly, you may find out exactly how and when the donated car will be used by the charity.

Check to see if the charity is legitimate. 

Make certain that you are donating to a real and respected non-profit. Look for organizations with a longer track record and more information in either the IRS’s tax-exempt organization database or a national charity database. Only the IRS has the authority to designate a group as a 501(c)(3) organization. Even if the status is listed on the group’s website or social media, you can readily authenticate it on the IRS website.

Aside from tax status, keep in mind that not all non-profits are created equal. Many people like to look into a charity’s spending history to guarantee that their money will be used wisely. Charity Watch and Charity Navigator are two websites that can help you confirm that the charity you’re considering has a solid reputation. Don’t make the mistake of donating to the wrong charity.

Transfer the Title Correctly

Whether you gift a car or sell it to an individual or corporation, the title must be legally transferred. If you don’t, you’ll be held legally liable for any parking citations, accidents, or felonies done by the next owner.

All reputable non-profits will request that the title be transferred to them. They will not request that you leave that information blank on the donation application. Some non-profits will auction off your used vehicle in the future. If the car sells at an auction but the new buyer does not register it, you are still legally liable for any events or crimes that occur.

Paperwork is essential.

Make sure you receive and keep any papers related to your donation. Scanning copies or snapping images of your data and storing them in the cloud assures that you do not lose them. They will be especially useful for any potential tax audits or other purposes.

If the car is worth more than $250, the IRS will want written acknowledgment from the charity. If the car is worth more than $500 but less than $5,000, complete Section A of IRS Form 8283 and attach it to your yearly taxes.

More on Tax Preparation

  • Because the Republican tax plan has boosted the standard deduction, you may find it more difficult to donate enough to qualify for a deduction. To determine your prospective tax refund, use our tax return calculator and enter your expected gift amount.
  • If your taxes and finances are complicated, you may consider dealing with a local financial advisor who can help you create a tax-efficient financial plan. Use our advisor matching tool to find a local advisor who suits your exact requirements.

Images courtesy of iStock.com/Handemandaci, iStock.com/Milaspage, and iStock.com/ferrantraite.