At first, it might sound simple to donate a used car, but there is more to it so for this reason in the following we are going to offer you a few tips.
First of all, it would be wise to avoid the middle men. Although you probably saw many ads on TV or on the radio from for-profit intermediary organizations, you need to know that they will keep about 50-90% of the car’s value for themselves, and the charities do not get what they could have gotten in the first place. For this reason, it would be best to check directly with these charities you prefer and find out if they accept car donations.
If the charity you normally help is not equipped to accept such significant donations, it would be wise to find another one that is willing to accept this gesture. You can find charities’ track records online by visiting Charity Navigator or the Better Business Bureau website.
If you still want to use the services of an intermediary organization, do your math and ask them how much they will charge. If the organization that you contacts will give to the charity flat fees – like, $100 for a used car, regardless of its value, or $3,000 a month – the donation you make might not be eligible for a tax deduction.
If you want to qualify for making a donation, the charity that will get it must be an IRS-approved 501 (c)(3) organization. A church, mosque, temple or synagogue likely qualifies. For finding out other qualifying non-profit organizations, visit the IRS’ website.
We recommend that in order to help the charity maximize the benefit of your significant donation, it would be best to deliver the car yourself so that the charity will not have to pay for the services of someone to pick it up from you and deliver it.
Needless to say, the transfer of the car must be done with great care so if you want to eliminate all of the potential risks of getting parking tickets along with other violations after you gave the car away, you will have to re-title the vehicle to the charity, and report the transfer to your local DMV. We highly recommend that you never agree to leave the ownership space on the charity donation papers blank.
The estimate that you make of the donation’s value probably is not 100% accurate. If the car you give away is worth more than $500, the IRS will want to see proof of how much the charity got for the vehicle. Most of these charities that accept car donations turn around and sell them for cash. You will have to get a receipt from the charity that tells how much money they made.
If the donation you make is less than $500 or the charity decides to keep the car, you won’t need evidence of the sales price. Then you can report its fair market value based on the listings from KBB or other similar sources.
When you donate a used car that is worth more than $500, you will have to attach IRS Form 8283 to your tax return. If the car is worth more than $5000, the documentation must include an outside appraisal. In addition, you will also need proof of the donation, like a receipt from the charity and a copy of the title change.
Last but not least, we highly recommend that you are detail-oriented. Although this paperwork might be a little difficult, keep in mind that this will probably be the largest donation that you will ever make. For this reason, take your time and plan things thoroughly.
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