Donating a Car

It's becoming increasingly popular for many Americans to consider donating a car, especially right after buying a new vehicle.  Unless you have a loved one that could use your used car, you have a limited number of options if you're replacing it with a new one.  You could trade the vehicle in, sell it yourself, or donate it to a charity such as the Salvation Army.

How Can I Donate My Car?

When buying a new car, you have a couple of ways to dispose of your old one.  For example, your options include:

• Trading in the Car - in all likelihood, trading-in a automobile is the easiest way to get rid of a used car.  It is coordinated with the delivery of your new car, and the used car deal can be folded into the one you've already negotiated with the dealership.
• Selling the Car - you can sell your used car through the classified section of your local paper, or online with an auction website such as eBay.  Admittedly, selling the car yourself can be a hassle, and even put your personal safety at risk.
• Giving the Car Away - if you know someone that needs a car, and you're willing to give it away, this is always a generous option.
• Donate the Car - finally, you can consider donating your used car, which is also a generous option.

Selling versus Donating a Car

Many consumers are starting to shy away from selling their cars themselves.  Certainly, there are several kinds of risk you take when you sell a car over the Internet or through the newspaper.  One risk has to do with your own personal safety.  There are many thieves and creeps in the world.  The second risk you take when selling the car yourself is that the car might be damaged or even stolen by a potential buyer.  Here is a story from one reader:

"Several years ago, I was selling my old car and I had people at my door wanting to test drive the vehicle. The car was a standard shift (it had a clutch) and a couple of people had never driven one before.  I had babied that car for years.  I nearly cried as people struggled to learn how to shift my car, while they grinded the gears."

The other risk you take when you sell the car yourself has to do with getting paid.  Make sure you get paid, meaning cash in the bank, before signing the car's title over to the buyer.  Once you've signed over the car, it will be hard to get paid if a personal check bounces or the cashier's check has a typo on it.

Getting Started Donating a Car

At this point, we're going to assume that you've thought through all of your options, and you're still wondering "how can I donate my car?"

From here we're going to walk you through a process that allows you to understand how to get started donating a used car to charity.  Realistically, there are two good reasons to donate a car. The first is that you get a good feeling inside knowing that you are helping others that are less fortunate.  The second reason comes from a tax break you should get for donating your car to a charity, not-for-profit, or nonprofit organization.

IRS Rules for Donated Cars

The Internal Revenue Service sets the rules for how much you can claim on your income taxes if you've donated a car.  Many advertisements you hear on the radio might lead you to believe that you can deduct the full value of your car, which means the value found in a blue book.  While a book outlining the value of used cars might be a good starting point, it is not always the value you can claim as a tax deduction on your tax return for a donated car.

In fact, the IRS has three rules when it comes to donating a car to charity:

1. The first rule is that the company must be a 501 (c) (3) charity or a not-for-profit organization.  The charity itself should be able to supply you with proof of this status, or you can contact the IRS at their toll free telephone number 1-877-829-5500.
2. The second rule has to do with being able to itemize your deductions for tax purposes.  The car donation line item would appear on Schedule A of your tax forms.  If you normally take the standard deduction instead of itemizing, then you might not get the full tax benefit when donating your car.
3. The final rule has to do with determining the value of a used car you've donated.  The rule is very straightforward:  You can deduct the fair market value of the car.  The fair market value is the price a willing buyer would pay, and a willing seller would accept, for the car.  This value can be different than the car's blue book value.  The IRS provides guidance on how to determine the value of a donated car.

Car Donation Paperwork

If you decide to donate your car to a charity such as the Salvation Army, which has their own process for this type of donation, then make sure you have the correct paperwork for your tax records.  At a minimum, you need the name and address of the charity or nonprofit organization to which you donated the car.

You will also need a description of the car (make, model, mileage, and year), the date, and location of the donation.  You should also have written acknowledgement for the car's donation; a receipt or similar document.  Taking pictures of the car can also help provide a record of the car's value.

If the car is valued at more than $500, then you will also need to fill out tax form 8283.  If the car is valued at more than $5,000, then you will need a written professional appraisal, which must be completed not more than 60 days prior to donating the car to a charity.

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