|
 It's becoming increasingly popular for many Americans to consider donating a car - especially right after buying a new car. Unless you've got a loved one that could use your used car, you only have a couple of options if you're replacing it with a new one. You could trade it 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've got a couple of ways to dispose of your old car. For example, your options include:
- Trading in the Car - In all likelihood, trading-in a car is the easiest way to get rid of a used car. It is coordinated with the delivery of your new car and the deal can be folded into the one you've already negotiated with the dealership.
- Selling the Car - You can sell your used car via the classified section of your local paper or online with an auction website such as eBay. Admittedly, there is a big hassle factor when you sell the car yourself.
- 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 lots of creeps out there, enough said. The second risk 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 car. Well, the car was a standard shift (it had a clutch) and a couple of people had never driven one before. I nearly cried as the gears grinded on that same car I had babied all those years as people struggled to learn how to shift on my car."
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?"
So now we're going to walk you through 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 than you. The second reason comes from a tax break you should get for donating your car to a charity 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 really has three rules when it comes to donating a car to charity:
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.
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.
The final rule has to do with determining the value of 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 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 of sorts. Taking pictures of the car can also help provide a record of the car's value.
If the car is valued at more than more than $500, you will also need to fill out tax form 8283. And if the car is valued at more than $5,000, then you will need a written professional appraisal that must be completed not more than 60 days prior to donating the car to a charity.
About the Author - Donating a Car
Copyright © 2005 - 2007 Money-Zine.com
|
Home 
