Donating a Car To Charity In 2015/2016
20 Important Questions & Answers

donating a car to charityCar donation to one of the large number of section 501(c)(3) charitable organizations has become extremely popular in the United States over the last decade or so.

If you are considering donating your car to charity, we have provided a list of the 20 most common questions and answers that prospective vehicle donors might have.

Below, we show you how you can ensure your chosen charity can maximize your donation, how to ensure you are legally released from your vehicle liability and, more importantly, how you can maximize your IRS income tax deduction.

1. Why Donate Your Car To Charity?

Why donate your car to charity?Donating your car to charity confers considerable benefits to you as the donor and the charity receiving your car.

Benefits For Donors

  • Donating your car can be a better alternative than selling your vehicle privately or through a used car dealership.
  • When your car is sold by your nominated charity, you have the right to claim a tax deduction – equivalent to the sales value of the vehicle – on your annual federal income tax return.  The amount you can claim depends upon additional factors such as your other income as well as the intended use of your vehicle by the charity.
  • Giving your car to charity can remove the problems and cost of disposing of your vehicle as many charities will visit you personally to collect your car.
  • By making an auto donation, the funds generated will be used to support any number of good causes both in the US and internationally, depending upon the focus and remit of your nominated charity.
  • Some car donation programs allow you to choose more than one charity.
  • As a donor, you can also donate motorcycles, RVs, boats, trucks, classic cars, jet-skis and even junk cars.

Benefits For Charities

  • New charities gaining section 501(c)(3) status can add an extremely valuable revenue stream to help with their fundraising programs.
  • The charity to which you donate your vehicle benefits through the additional funds it is able to generate following the sale of your vehicle.
  • Charities maximize their tax exemption status.
  • A charity may use your vehicle in the course of its normal charitable and fundraising programs and activities.
  • Charities accepting car donations are able to ‘invest’ in your vehicle through repairs, maintenance and servicing with the aim of increasing its value to raise more funds.  You may wish to search for charities that do this as you will be able to claim a higher tax reduction on your income tax return.
  • Participating organizations may choose to distribute vehicles to those in need of transportation at low cost or below market value in accordance with their stated charitable objectives.
  • Car donation charities can choose to operate their own car donation program or appoint a ‘for-profit’ entity to manage it for them using the charity’s name and branding.

2. What Types of Vehicle Can I Donate?

What types of vehicle can I donate?In order to benefit from a tax deductible car donation you can donate nearly any kind of vehicle. Most people are not aware that most car donation programs will not only accept cars.

These include but are not exclusively limited to cars and autos, motorcycles, mopeds, RVs, motorhomes, boats, yachts, jet-skis, off-road vehicles.

Some types of heavy machinery may also be accepted.

3. Does My Vehicle Have To Be Running?

Does my vehicle have to be running?Importantly, the car does not need to be in working order or running properly.  Some charities will even repair or service your vehicle if they believe they can sell it for more money in better condition.

Remember, the greater the price achieved the more you can claim on your income tax return, so it may be worth seeking out those charitable organizations who are prepared to help themselves to help you.

Most charities will also accept so-called ‘so-called junk cars‘ or unroadworthy vehicles and auction them for parts to get the best price.

4. How Do I Value My Vehicle?

How do I value my auto?In order to make an assessment as to the relative merits and tax advantages in donating your auto, you should initially calculate its fair market value or FMV.

There are a number of resources available that can assist you.

Kelley Blue Book

The Kelley Blue Book is probably the most trusted resource for establishing current vehicle values in the US.

First published in 1926, should be your first stop if you want to ascertain the fair market value of your car.

NADA Guides

Trade and industry professionals immediately recognise the blue and yellow of NADA guides, specialists in the publication of car pricing for all types of new and used cars, vintage and classic vehicles, boats, snowmobiles, motorcycles, RVs, ATVs and manufactured homes.

NADA guides collects data relating to the purchase and sale of these types of vehicles and therefore, can a provide a unique insight into the market for your vehicle at any given time.

Edmunds is an auto information website, first launched in 1995, specialising in new and used car pricing data for assisting car buyers.

Black Book USA

Black Book® is well known in the car business for the provision of  up-to-date, independent, and accurate vehicle pricing data.

We strongly recommend consulting these resources to find out exactly what your car is worth.

You should then contact your car charity of choice to discuss your options with them and to obtain their opinion as to the likely sales price they can achieve on your behalf.

With this information, you will be well-placed to decide if donating your car is the correct option for you.

5. Who Can I Donate My Car To?

Who I can donate my car to?You can only donate your car or vehicle and, therefore, claim your IRS tax deduction if you donate your car to an officially qualified charity.

Which Charities Are ‘Officially Qualified’?

‘Officially qualified’ in this case means a registered charity, educational establishment or religious organization which has 501(c)(3) charity status according to the Internal Revenue Service (IRS).

The IRS annually publishes IRS Publication 78 – entitled Cumulative List of Organizations – which is available online and in public libraries.

Donating To Churches & Religious Institutions

Churches, mosques, synagogues, temples and other officially recognized religious institutions do not have to be registered as a charity for you to donate your car.  Making a donation of any kind to such organizations is always tax deductible.

How To Check A Charity’s Status?

If you are unsure as to a charity’s official status you should call the IRS Customer Account Services division for Tax Exempt and Government Entities on (877) 829-5500 (toll-free).  Before you call, be advised to have the car donation charity’s full name, address and any other relevant information at hand.

We recommend also consulting our page on how to check a charity’s tax-exempt status.

You can also consult the Better Business Bureau‘s non-profit and charity list or Charity Navigator.

6. Where Can I Donate My Car?

Where can I donate my car?The only way you can donate your car and claim your car donation deduction is by contacting an officially qualified section 501(c)(3) charitable organization which either runs its own vehicle donation program or has an affiliated agency working under its name.

Car Donation Programs

There are registered car donation programs in every State in the US.

Your choice of charity, however, will usually be informed by your preferred cause and where and how you would like the funds from the sale of your vehicle to be used.

You are strongly advised to check the authenticity of the charity as well as the workings of their vehicle donation program.

Vehicle Donation By State

For more information about how to donate a car to charity, release your title and vehicle liability in all of the 51 US states, see the following pages:

7. Which Documents Do I Need To Donate?

Which documents do I need to donate my car?In order to donate your vehicle, you will need to demonstrate that you are the car’s owner and that you have the legal right to sell it and effect a transfer of title.

Some charities are able to assist in the event that you have mislaid or lost your title documents and for vehicles under $500 they may not even be necessary.

Check with your nominated charity or your State’s Department of Motor Vehicles to find out what you need to do.

Proving Title

Your proof of title can usually be demonstrated by submission of the one of the following documents:

  • Your vehicle’s title certificate
  • Your car’s registration card
  • Your vehicle’s notice of renewal form
  • The car’s license plate number
  • Current car insurance documents or policy
  • The vehicle identification number or VIN

8. Can I Donate If I Lost The Title?

Can I donate my car if lost the title documents?In most cases, you will be required to prove that you are the auto’s legal owner and that you have the right to sell the vehicle.

If you have lost the title documents, you should contact your nearest Department of Motor Vehicles to obtain a duplicate.

Consult our state-by-state guide on where to donate a car for precise information in your state.

9. How Do I Release Liability Of My Vehicle?

How do I release liability for my vehicle?The precise procedures for releasing liability of your car is different in most States. In most cases, however, liability is released when you transfer the vehicle’s title.

Additionally, you may have to remove your license plates and inform you local DMV. In some states, this is compulsory before you can cancel your insurance.

For more information, please visit our section on car donations by state.

10. Do 100% Of The Proceeds Go To My Charity?

Do 100% of the proceeds go to my charity?The short answer is, it depends.

The car donation industry is larger and more competitive than you may realize with some established charities receiving millions of dollars of revenue from charity car auctions every year.

Charities & The Second-Hand Car Business

Charities relying on funds from car donations are directly aligned with the used and second hand car business.  As a business sector it doesn’t have the cleanest track record or reputation and therefore, we strongly recommend you ask as many questions as possible before you part with your vehicle.

Of course, if you are not concerned about claiming a tax deduction, then the most important decision is your preferred choice of charity or beneficial cause.

Look Out For Profit-Making Agents

At the very least, you should be concerned about how much revenue your chosen charity will receive once your car is sold.  You may not realize it, but many charities – particularly the smaller, local ones – are not directly responsible for running their own vehicle donation programs.

Many have chosen to take advantage of legislation set out in IRS publication 4302 (“A Charity’s Guide to Vehicle Donations“) where a ‘for-profit’ agent is hired to operate the program under the charity’s banner.  Ultimately, the charity is responsible and accountable for the agent’s activities.

As a car donor, however, you will not know exactly how much or what percentage of the final sale will be received by your charity.  What is certain is that by donating your car to a charity that does operate its own donation scheme, most of the revenue from your car’s sale will end up in its coffers.

Beware ‘Celebrity’ Advertisements

Despite the plethora of advertising and the celebrities who regularly stand behind so-called charitable causes and concerns, this is perhaps the single most important part of the donation process where the seller should ‘beware’.

Our advice, therefore, is to ask as many questions as you feel are necessary and do not be afraid to turn your attentions elsewhere if you do not get the answers you require.

11. Can I Donate To More Than One Charity?

Can I donate to more than one charity?In general, you would choose a single charity and cause to donate your car to.

Remember that your choice does not have to include conventional charities, but might be an educational institution or even your local church or religious group.

There are some large organizations (such as Cars For Causes), however, who work on behalf on other smaller charities.

By working with an organization like this, your donation would be split between the main charity and one of the many 1000s of others that they work with.

12. What Happens To My Car Once Donated?

What happens to my used car once donated?When you donate a car to charity, one of three things can happen to your car.

Auction Sales

In the large majority of cases, the attraction of additional revenue for most charities means they will attempt to turn it into cash as the first available opportunity.

The easiest way to do this is to send it to a charity car auction where it will be sold to the highest bidder.  It is unusual to set minimum reserve prices on donated vehicles and it is probable, therefore, that it will not sell at its fair market value (FMV).

Given that the car was never a fixed asset of the charity, there is little motivation to hold out for better prices.  Some charities, however, will opt to repair your car prior to the auction if they believe that doing so can increase the final sales price.

Vehicle Used By Your Charity

Some charities use donated vehicles in the course of their fundraising activities instead of attempting to sell on the open market.

If you find a charity who will utilize your vehicle in this way, you may be able to claim a much higher car donation tax write off than if it is sold at auction.

Vehicle Sold To A Person or Family In Need

Some charities specialize in helping the poor and destitute and it is not uncommon, therefore, for donated cars to be sold at below market prices to those who otherwise would be unable to afford them.

Once again, if you can find a charity operating like this, you may be able to deduct the maximum possible tax relief according to the fair market value of your vehicle.

13. What Happens If My Car Doesn’t Sell?

What happens if my car doesn't sell?It is the case that sometimes, for whatever reason, donated cars do not sell at auction.

Given that your charity is unlikely to set a reserve price or want to keep you car, truck, RV or boat ‘in stock’, many are simply sold for the value of their parts or scrap metal value.

This practice tends to be more common at the lower end of the market and obviously with junk car donations.

14. How Will I Know My Car Is Sold?

How do I know my car is sold?Unless you personally attend the vehicle auction, it remains the responsibility of the charity to inform you that your vehicle has been sold.

IRS Publication 4303 clearly states that the charity must provide ‘written acknowledgment’ to the donor within 30 days of the sale either on Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, or in a separate statement providing it contains the following information:

  • Confirmation that the car was sold to an unrelated third party in an “arm’s length” transaction
  • Date of the sale
  • Gross proceeds realized from the sale
  • Confirmation that your tax deduction must not be greater than the gross sale proceeds

There are some exceptions to the gross sale limits which we discuss in the section tax information for donors.

15. How Do I Claim My Car Donation Tax Credit?

How to claim your car donation tax credit?You can only claim your car donation tax deduction when you have donated a qualifying vehicle and you have received written acknowledgment from your selected charity.

The written acknowledgment will confirm that either:

  • the vehicle has been sold at auction together with information about the date and price of sale, or
  • the charity has sold your vehicle to a needy individual, or
  • the charity intends to utilize your vehicle during the course of its ongoing fundraising activities

Fully Itemize Your Deduction

You can only claim your tax write-off providing the deduction is fully itemized on your annual federal income tax return.

Different rules and some exceptions apply depending on the price achieved for your vehicle.

For more detailed  information, see the related section on tax deductible donations.  We recommend that you also take time to understand the difference between a tax credit and a tax deduction.

16. How Can I Maximize My Tax Deduction?

How can I maximize my tax deduction?Thanks to a law passed by President Bush in 2004, tax deductions are generally limited to the sale value of your vehicle at auction.

The downside to leaving your car at the auctioneer’s and, therefore, the second-hand car market’s mercy is that it may not be sold at a level anywhere near its real market value.

If this happens, the tax deduction you were anticipating may be reduced and it might leave you wondering whether donating your car was the best course of action after all.

Deducting The ‘Fair Market Value’ (FMV)

The good news is that by doing a little more research you can maximize your donation tax reduction by claiming your vehicle’s true market value.

You can deduct the fair market value of your car if you can find a charity that either:

  1. Agrees to use your vehicle during the course of its normal fundraising activities for a significant period, or
  2. Intends to donate or sell your car to a “needy” individual at a below market price,

Some of the larger charities occasionally are willing to invest additional funds to repair your car in order to improve the potential sale price.

This raises more funds for the charity and of course, increases the amount you can deduct.

17. How Do I Prove My Tax Deduction?

How do I prove my tax deduction?The only acceptable proof as far as the IRS is concerned is a written acknowledgment from your chosen charity.

This must be provided within 30 days of the sale of your vehicle or if you are claiming a higher tax deduction under the ‘gross proceeds rules‘ (that is, you are claiming your vehicle’s fair market value), within 30 days of  your donation.

18. How Much Tax Can I Deduct?

How Much Tax Can I Deduct?Your car donation tax reduction is limited by the official sale’s price of your vehicle at auction or its fair market value.

There are no other circumstances where you will be able to deduct more than this amount.

Whats’ Your AGI?

You should also note that you can only deduct up to a maximum of 50% of your adjusted gross income (AGI).  If you have insufficient AGI, then you can claim the difference during the next 5 years.

19. Does The IRS Need To Appraise My Claim?

Does the IRS need to appraise my claim?In general, and certainly for donations under $5,000, the IRS do not need to inspect or appraise your donation.

However, if you’re donation exceeds $5,000 then it will need to be confirmed independently by an IRS official.

Beware Tax Inspections

Non-cash donations are one of the areas that frequently trigger tax inspections or audits and it is always the donor’s responsibility to ensure that the tax deduction being claimed can be fully justified in accordance with the requirements set out in IRS publication 4303.

Retain Copies of Everything

You are strongly advised to ensure you collect and retain copies of your vehicle’s valuation, the written acknowledgement from your charity and particularly proof of any additional work done (either by yourself or the charity) to increase the car’s value prior to its sale.

Donors are reminded that the onus is on the donor and not the charity to provide proof for claiming any qualifying tax credits.

20. Can I Donate A Junk Car?

Can I donate a junk car?Virtually every vehicle has a value whether it’s running or not.

That’s why most qualifying charities are happy to accept junk car donations as these types of cars will be sold for parts or their scrap metal value.

Consult with your preferred charity first.

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