How to donate your car | RNL Blog

Do you want a to get rid of your old car? You can try and sell it, take photos, answer calls and emails, and schedule test drives and inspections with potential buyers.

Or you could donate your car to charity and possibly get tax credits.

Numerous charities make it easy for you to donate your automobile. Whether it works or not, they can get it for free. However, if you want to claim a tax deduction for your donation, you must follow the IRS rules.

How to donate your car to charity

Many well-known and respected charities such as Habitat for Humanity, Disabled American Veterans, and the Make-A-Wish Foundation accept car donations.

Local high schools and vocational schools may also receive donated vehicles for use in auto workshop classes.

The easiest way to donate your car is to call the dealership or fill out an online donation form. The charity will arrange for the car to be picked up or dropped off at a designated location. You will also be given a receipt to use when preparing your tax return.

How to review car charities

When donating your car to charity, take precautions to evade being scammed or donating to a suspicious charity. If you donate your car to an organization that is not authorized by the IRS to receive tax-deductible donations, or if you do not receive the required paperwork, you cannot claim a tax deduction.

Ensure that the organization is eligible to receive tax-deductible donations

Most charities that qualify for tax-deductible donations have 501(c)(3) status with the IRS.

If you are not sure if a foundation qualifies, contact the charity on the IRS Tax Exempt Organization Finder or call the IRS at 877-829-5500 and ask for the charity's name and address.

Donate to effective and transparent charities

Even legitimate charities may be unsure of how to use donations or use only a small percentage of contributions for charitable programs.

For example, one controversial car donation program is Kars4Kids, which airs advertisements on radio and television across the country.

According to CharityWatch, an organization that rates charities on efficiency, governance, and transparency, although Kars4Kids is a legitimate 501(c)(3) charity, it deceives potential donors by not reporting that it only serves children of a particular faith. 

CharityWatch also reported that Kars4Kids spent more on overhead than charitable programs in 2015; This is a red flag that the organization is not using donations efficiently. However, Kars4Kids' report on its activities in 2020 shows that most of the spending (60%) was for its programs for that year.

Before choosing an organization to donate to, you may want to research the charity on CharityWatch or a similar nonprofit database to make sure it shares your values.

Claim a tax deduction for a car donation

Selecting a suitable charity isn't the only necessity for getting a tax determination when you donate your car. Before you can declare the full deduction, you must:

embody deductions

First of all, you need to determine the deductions in the items to take advantage of the contribution. Donating your car at tax time won't do you any good if you claim the standard deduction that nearly 90% of taxpayers do.

Gather the correct documents

The amount of your spending and the documents you need will depend on the value of the car and what the charity will do with it. The organization can use the vehicle in its operations or sell it and keep the income.

Regardless of how the charity handles the car, you must get written approval for the donation if you plan to claim the car is worth more than $500. This consent must include:

  • Your name and Social Security number

  • The vehicle's vehicle identification number (VIN)

  • Contribution date

  • Confirmation that the charity does not provide any goods or services in exchange for donations (or the estimated value of the goods and services provided)

If the charity sells your car, your deduction will be limited to the proceeds of the sale - this may be less than the value of the car.

For example, suppose you donate a car valued at $3,000 to a charity, but the charity sells the car for $2,000. In this case, your discount is limited to $2,000.

After the vehicle is sold, the charity must send you a Form 1098-C (or similar form) within 30 days. The form must include:

  • A statement confirming that the charity sold the car "in a commercial transaction between unrelated parties". In other words, the charity has not sold it to an employee or other related party at a discount.

  • The date the vehicle was sold

  • Gross income from sales

However, if the charity plans to use the car for its activities, you can deduct the fair market value of the car at the time it is donated. In this case, the charity's written consent must confirm that the organization plans to use the tool and explain the purpose of its use.

You must include Form 1098-C or other written consent and Form 8283 when you file your tax return.
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