Donating an old car to charity is a great way to make a difference in the world — a car, no matter how beat up or broken down, represents considerable value. Before you actually give a car away, though, it’s important to evaluate the organization that you’re giving it to. You need to ensure that it does good work, and is professionally managed. Many organizations publish reviews of well-run charitable organizations — you only need to look at their findings online to know which organizations deserve your attention. Once you find a few that you like, you’ll also need to know about what exactly to expect through the process. Here’s a quick guide that should help.
Look for a charity that accepts vehicle donations
If you have the time, it makes sense to try looking for a charity that directly accepts vehicle donations. If a charity that you like isn’t equipped to accept them, you might be tempted to try an intermediary organization that picks up cars, sells them, and then passes the money to the charitable institution of your choice. These intermediaries tend to keep half the money generated from the sales that they process, though. When you pick a charity that directly accepts car donations, you make sure that the entire value of your donation goes to fund their work.
Using the services of an intermediary
If you cannot find a charity that directly accepts cars, using an intermediary may be your only option. Before you pick one, though, it’s a good idea to research your options. While some take a large cut for themselves, others make do with more reasonable fees. You should consult the charities that you like, and ask them for recommendations. They will usually tell you which intermediaries are the most reasonable.
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Spend Time for Research
Researching your choice of car donation program is something you should never bypass. Don’t just go out there and let them take your car.
For example, if you’re hoping to get a tax deduction on your donated car, make sure that the recipient is qualified to accept tax-deductible contributions by the IRS. To give you an idea, in case you’re not familiar with it, nonprofit organizations with 501(c)(3) status are qualified. Educational and religious organizations also meet the qualifications.
Below are three excellent resources for researching charities to help you determine your chosen charity or program scores.
Better Business Bureau is always a good source if you are looking for information about a charity’s fundraising methods and financial information. You can also get an idea of the percentage of donations that go to their programs, their administrative costs, and how much goes to the fundraising itself.
Meanwhile, CharityWatch.org is an independent organization that evaluates charities based on the percentage of donations that the charity used to fund programs as compared to the percentage they use for fundraising and administrative costs.
Lastly, you can also check GuideStar for more comprehensive information about every charity registered with the IRS. You’ll like how they present their research in an easy-to-understand format.
If you can, take the car there yourself
Most charities that accept car donations make it easy for you to get rid of your car, no matter its condition. You only need to call them and set up a time — they sent someone over to pick up your car. If the car isn’t fit to be driven, they arrange for a tow truck.
While you certainly can take advantage of these free services, you should realize that money for them comes out of the proceeds of the sale of your car. If you want to make sure that all the money from the car goes to the good work that the organization does, you should consider arranging to bring the car to them yourself.
Not every donation to a nonprofit is tax-deductible
Some organizations like the National Rifle Association are nonprofits, but focus their efforts on lobbying the government. Donations to these nonprofits aren’t tax-deductible — they are termed 501 (c) (4) organizations under IRS rules. For charities that do qualify for tax deductions, you should look for organizations that have public charity status under 501 (c) (3).
If you want to verify if a charity or organization is qualified to receive tax-deductible contributions, you can contact the IRS by using the Exempt Organizations Select Check Tool on their website. Or call the IRS Customer Account Services division for Tax Exempt and Government Entities directly at 877-829-5500.
Make sure that you perform the transfer correctly
When you donate a car, the charity needs to do the paperwork necessary to transfer the title of ownership to itself. Some charities, though, are unwilling to endure the hassle. When you fill out the forms, they will usually ask you to leave the fields that refer to ownership assignment blank. If a charity asks you to do this, you should find another organization to donate your car to. If they don’t transfer the title away from you, anything that happens to the car could be traced back to you. If the new driver of the car gets into an accident or gets a parking ticket, for instance, the police will come looking for you.
Make sure that the car is correctly valued
The IRS looks closely at deductions claimed for charitable car donations. Ever since the passing of the American Jobs Creation Act of 2004, taxpayers can no longer easily claim a deduction for the market value of the model that they’ve donated — they need to prove that the car did indeed fetch for the charity what they claim it did.
If you wish to deduct anything more than $500, for instance, you need to file a receipt from the charitable organization that shows exactly how much they made off the car, and file Form 8283 (Section A of the IRS Code). If you deduct more than $5,000, you need to file Form 8283 (Section B of the IRS Code). For detailed information on how to make a deduction for a donated car, you should look for IRS publication 4303 – A Donor’s Guide to Vehicle Donations.
Make sure that you use the car’s Fair Market Value
In most cases, charities sell the cars they get and give their donors a receipt for their tax deductions. In some cases, though, they decide to use the cars they get, rather than sell them. In these cases, you get to deduct the fair market value (FMV) of your car — the price that the car would get if it was sold on the open market. You also get to use the FMV when the charity sells the car to a needy person at a discounted price, or when it decides to fix up the car before selling it.
When you donate a car to a charitable organization, often, you benefit more from it than they do — you get a generous tax deduction. All it takes to make sure that both you and the charity win, is to find an organization that knows its business, and is able to process your car donation with as a little money wasted on overheads as possible.