4 important things you should know before donating a car | RNL Blog

Do you have an old car lying around that you no longer use? If so, one way to get rid of it is to donate it to charity. Depending on the needs of the charity and the vehicle it owns, the charity may use the vehicle itself, sell it to someone in need at a discount, auction it for money, or sell it to a junkyard.

In some cases, your car does not need to be run before you can donate.

Many charities make it very easy to donate your car in just a few steps. Many charities will get your car for free. However, if you want to claim a deduction on your taxes and get a refund, the rules are a little vaguer.

Read on for more information on how to donate your car and get a tax deduction if you qualify.

How to donate your car

The easiest way to donate your car is to contact a charity and arrange for them to collect your car. Many large charities, such as Habitat for Humanity, Goodwill, and the Salvation Army, offer services specifically for this, with websites with phone helplines and donation forms.

There are also special car donation services such as Charitable Adult Rides & Services that handle all the details and let you choose which charity you want the proceeds to go to.

If you're willing to work a little harder, another option is to sell the car yourself and donate the money. In some cases, this may be more beneficial to the charity because you can sell yourself for more than what the charity could get at auction.

Steps to keep yourself safe when donating your car

  • It is generally safe to donate your car to a charity. However, you'll want to take some steps to help protect yourself and not be held responsible for anything that happens to you after you give up your car.

  • Be wary of organizations that sound too good to be true—for example, if they promise to deduct as much tax as you want.

  • Get a receipt from the charity.

  • Remove your vehicle's license plates after you are done driving.

  • Complete a transfer form to sign your title with your state's transportation agency or auto agency.

Tax credits: What you need to know before you donate your car

One of the biggest benefits of donating your car is that you can deduct your charitable donation.

However, like everything else the IRS controls, it's not as simple as turning the car over to a charity and then deducting the value from your taxable income. Instead, you must meet certain criteria to be able to deduct donations from your taxes. You can find more information in the IRS car donation guide.

You will need to itemize your deductions

If you just itemize your taxes, you can claim a benefit deduction (including auto). Unfortunately, with the new tax law changes, most people are better off claiming the standard deduction, so your car donation may not do you any good when it comes to tax time.

You will need to donate to an eligible charity

For your donation to be considered a tax deduction, you must return your vehicle to a registered 501(c)(3) or tax-exempt religious organization. You can check your charity's eligibility by calling the IRS helpline at 1-877-829-5500 or by visiting the IRS website.

You will need to collect certain documents

After you hand your car over to the charity, you should immediately receive a written receipt. Depending on what the charity does with your car, at some point you will receive a written confirmation or Form 1098-C (Motor Vehicle, Boat, and Aircraft Contributions). Keep this document as you may need the information to file your taxes or even submit the same document if you are withholding more than $500 on your taxes.

Also, if you're donating a car worth more than $5,000 and the charity doesn't plan to sell it for cash, you must get a formal written appraisal at least 60 days before you donate the car.

Complete the appropriate tax forms

Most charities sell cars donated to them for money. In this case, you can deduct the final sale price that the charity will provide you with written consent or Form 1098-C.

Depending on how much you can deduct, you will need to provide the following documents with your tax return:

  • $500 or less: Nothing special, but keep your records in case you come under scrutiny.

  • $501 to $5,000: File Form 1098-C or Written Consent plus Part A of Form 8283.

  • Over $5,000: File Form 1098-C or written consent plus Part B of Form 8283 and a written evaluation of the vehicle if the charity is not selling it.

Whether or not you qualify for a tax deduction from a car donation, charities are sure to be grateful for it. Even your old junkyard is eligible for a donation, as charities might sell it to a junkyard.

So consider donating your car - it's a great way to clean up your yard while also helping people. This is a win-win scenario - if you're planning on making a deduction, make sure you pass all points and score all in.

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