Donating a Car: A few Things You Need to Know

Donating your car can help with your tax bill, free you up to get a new car, and let you know you just made a major difference in someone’s life. But you need to be informed to maximize all those results. Here are the ten basic things you must know before you hand over the keys of your car to that charity.



1) You will only get a tax deduction if you itemize deductions on your tax return.

In other words, if you are not going to itemize deductions on Schedule A of Form 1040, there is no tax benefit to donating your car (though there are still excellent humanitarian reasons to donate the car). You’ll also need to stay below the maximum amount of deductions for the year — you can not deduct more than half your income.

2) You will only get a tax deduction if the charity you are giving the car to is qualified to accept it per the IRS.

IRS annual publication 78 lists all the charities that have 501(c)(3). You can search publication 78 online to find your charity fast. However, religious organizations do not need 501(c)(3) status to be able to accept cars. If you have any doubts whatsoever about whether the IRS will give you a deduction for your car donation, you can call them at 877-829-5500 and get an agent on the phone to give you the final verdict.

3) Avoid shady charity car donations.

There are a lot of very prominent “charity car donation” outfits that will say they will give your car to charity for you. What actually happens is that they auction your car off to the highest bidder, pocket 50 to 90 percent of the sale price, and send a very small token check to the charity. Some of these firms are better than others – always ask how much of your car’s value will end up being given to the charity.

4) Don’t make your charity pay the towing fees.

If you really want to help your charity out, drive your car to them (or, if its not running, have it towed to them on your dime). Most of the larger charities do offer towing services, but you’ll be giving them a bigger gift if you just drive the car over.

5) Know the fair market value of your car.

In other words, check the Kelly Blue Book to know what your car is worth before you hand the keys over. You’ll need this information for your tax deduction. However, if your deduction is worth less than $500, or if the charity keeps the car for their own use (like 1-800-Charity-Cars), you will not need proof of sale. But you’ll probably need a letter from the charity saying they are going to keep the car for themselves.

6) Re-title your car to the charity.

If you don’t want to be responsible for parking tickets or anything else that happens with the car after you’ve donated it, report the title transfer to motor vehicles. Make sure the charity donation papers define who owns the car.

7) Get a receipt from the charity, on their letterhead, with a contact name and number.

The charity must send you this within 30 days of the donation. If they sold the car at auction, this will be the “fair market value” of your car, which is what determines your tax deduction.

The charity’s receipt papers should also include a copy of the title transfer. If your donation is worth more than $500 you’ll need this document, and you’ll have to file IRS form 8283 along with your tax return. If your donation is worth more than $5,000, you’ll also have to get a professional appraisal of your car.

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