Donate a Car to Charity for a Tax Deduction

A Look at Automobile Charitable Donations and Alternative Ways to Get Rid of a Vehicle

Do you own an unwanted vehicle? Or maybe a boat that just sits in your driveway and never gets used? Did you know that you can donate it to charity and get a federal tax deduction?

In 2011, American charities received 298.3 billion dollars in donations and charitable giving. One of the popular revenue streams for charitable organizations is vehicle donation programs. VehicleDonationProgram.org offers listings of accredited auto donation charities throughout the USA as well as information about how to sell your vehicle for cash, so you can make an informed decision.

The Type of Vehicles that are Eligible for Donation

Most charities will accept almost any vehicle, regardless of whether or not it is working condition.

The Most Common Types of Vehicles Accepted for Donation:

• Cars
• Vans
• Pickup Trucks
• RVs and Campers
• Boats
• Trailers
• ATVs
• Helicopters and Airplanes

A Look at the Pros and Cons of Donating an Automobile to Charity

Every year, hundreds of thousands of vehicles are itemized as charitable donations to local charities. There are several benefits involved in the auto donation process, but there are also some pitfalls to watch out for. Below are some talking points to consider before making you decision.

The Advantages of Donating a Vehicle to Charity:

• The donor gets a tax break: When you turn in your vehicle to the charity, they will provide you with the necessary tax forms, including IRS Tax Form 1098-C : The Written Acknowledgement of Vehicle Contribution. Several factors will determine the exact amount of deduction you will eligible for, but the figures are usually 10 - 15 percent less than the fair market value of the vehicle. Also, if the fair market value of your vehicle is greater than $5000, you must have it independently appraised before you donate it. Depending on your income tax bracket, choosing to donate rather than sell your unwanted automobile can be a good idea.
Research The Fair Market Value of Your Car
• The money stays in the community: In most cases, the proceeds that the charity receives from the sale or use of the vehicle are used to directly assist people in need within the community. Rather than selling the cars at auction, some charities will refurbish them and give them to needy families in the community.
• You don't have to go through the hassle of selling your used car: When you donate to a reputable organization, they will make the donation process virtually hassle-free. In most cases, you simply contact the charity and schedule a pick-up time. They will have their towing service haul-away the automobile and the proper tax paperwork will be mailed to you within approximately 2 weeks of the donation date. It's basically as simple as that.

The Disadvantages of Donating your Vehicle to Charity

• Car Donation Scams: Always research the charity that you are considering donating to. In order to get a tax deduction, the charity must be officially classified as a 501(c)3 Organization. Misleading schemes and scam artists that claim to be a charitable organization are prevalent throughout the USA. Usually, these individuals are actually junk car dealers that will promise to tow away the vehicle for free and mail you the paperwork. Unfortunately, in many cases, they don't honor their promises. Here is a list of the top-rated charities to consider: Directory of Approved Automobile Donation Centers
• The amount of the deduction: Your deduction amount may not be as much as you anticipate. According to IRS Regulations on Car and Vehicle Donation, if the value of the donated vehicle exceeds $500, there are specific rules that you must follow. In most situations, the amount you can deduct on your taxes is not the fair market value, but rather it is the amount that the charity sells your car for at auction.

Learn more about What Happens to Your Donated Vehicle.

• Not all of the money actually goes to the charity: For logistical reasons, some charities will contract with a third-party operator, such as a scrap yard service, to run the donation program and handle the towing and haul-away services. In these situations, the charity will split the profit of the donation with the third-party. This often results in roughly 50% of the gross revenue actually ending up in the charity's hands. Before you donate your car, contact the local charities in your area.

• Research the Operating Efficiency Ratings of Charities
• Read the FAQ's About the Car Donation Process

Reasons to Sell Your Unwanted Car for Cash

In most parts of the country, there is a large demand for salvaged or "junk" cars. Since they are not bound by charity-specific IRS regulations, automobile recyclers and junkyards are more accommodating to the condition of the vehicle as compared to charitable organizations. According to the Automotive Recyclers Association, over 4.7 million vehicles were recycled in 1997, and it is a robust and growing business. For this reason, junk car buyers will often pay cash on the spot for any type of automobile in any condition. This includes:

• cars involved in a collision
• old, rusted out vehicles
• flood damaged cars
• project cars

Even if the car is wrecked or rusted out, it still has an intrinsic value. For cars that are severely damaged, the functioning auto parts will be stripped out and sold off. The rest of the vehicle is usually sold to a scrap metal wholesaler who can recycle the steel. Automobiles are the #1 most recycled consumer good in the USA. Recycling steel is not only good for the environment, it provides a lot of American jobs.

View More Car Recycling Statistics Here

For cars that still run, they can be refurbished to a roadworthy condition and sold for a profit. There are several junk car and salvage car dealers that operate under this business model.

Things You Must Do Before Selling or Donating Your Vehicle:

Regardless of whether you choose to sell your vehicle or donate to a local organization, there are a few steps to take beforehand:

• You must have a clear title: In the vast majority of situations, you must possess a free and clear title to the vehicle you are getting rid of. If you have lost your title paperwork, you should contact your local DMV office to obtain a copy. If you own a car that was involved in a serious accident or is inoperable, you may need to file for a salvage title. For example, in the state of Colorado, if you own an automobile that needs repairs costing in excess of the fair market value of the vehicle, you must submit the Colorado Application for Automotive Salvage Title.
• Be sure to remove the license plate: Don't forget to remove the license plate from the vehicle. You can either re-use it on your next vehicle or return it to your local DMV center.
• Remove any valuables: Check the glove box, the trunk, and under the seats. You want to remove all documents and look for valuables that you may have forgotten about such as jewelry, spare change, or personal electronics.

Conclusion

Getting rid of an unwanted automobile or other vehicle is usually a win-win situation. Not only do you to free up some extra garage or driveway space, you are putting some extra money in your pocket. And, if you decide to donate to charity, you also get the satisfaction of helping others along the way.