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Home  Tips and Info Articles Donating Your Vehicle to Charity
Donating Your Vehicle to Charity
Determining if your gift is deductible
In past years, car donations have become a popular means of giving to an organization while receiving the benefit of a handsome income tax write-off. With increased frequency, radio announcements, classified ads, and television promotions tout used vehicle donations as a giving alternative. The Better Business Bureau advises potential donors not to be driven simply by the allure of a deduction, but to research the group carefully before handing over the vehicle.
Are all groups eligible to receive deductible vehicle donations?
Just because an organization sounds like a charity doesn't necessarily mean it is eligible to receive deductible gifts. To determine if your gift may be written off as a tax deduction, ask for a copy of the organization's Internal Revenue Service (IRS) Determination Letter. Generally about two pages in length, this letter verifies the soliciting group is tax exempt as a charity under section 501 (c) (3) of the Internal Revenue Code. (Note that churches are not required to apply for tax exempt status and may not have such a letter.)
How should a charity be chosen for a donation?
To make the most of your donated gift, research a nonprofit organization carefully. Request copies of the organization's IRS Form 990 that specifies how much the group raised in past years and how the money was spent. Ask for written information such as brochures about the charity's mission, who benefits from the group's services and how the programs are administered to the community.
What happens to donated vehicles?
Some charities will use donated vehicles to carry out the group's programs. For example, a nonprofit assisting the elderly may use the vehicle to transport individuals to doctor visits, or a group feeding the needy may use the vehicle to deliver meals. Other group's will simply sell the vehicles and use the proceeds to fund programs. In some cases, a toll free number is offered in an ad to donate vehicles to charity. In these cases, chances are good that a company is soliciting on behalf of several participating nonprofit groups.
How much will the charity receive from donated vehicles that are sold?
Vehicles could be sold directly by the charity or through an outside seller such as an auctioneer or used car dealer. If an outside seller is involved, the charity will not benefit from the actual sales price. The charity may receive a flat fee (for example, $100 per vehicle), a percentage of the actual selling price, or a combination of these. In some cases, less than 20% of the actual sale may go to the charity. The nonprofit should disclose the specifics of the financial information. If not, ask before you donate.
What forms and receipts are needed to take a tax deduction?
It is advisable prior to the donation to determine the vehicle's fair market value. These appraisals will assist you in placing a dollar value on your donated gift. An official used car price guide or "blue book" will offer estimates based on the vehicle's condition and compare what similar vehicles are going for in your area. If the claimed donated value exceeds $500, the individual contributor will need to complete an IRS Form 8283 as an attachment to their annual tax return. If the claimed value is over $5,000, the donor will need to obtain a qualified written appraisal of the vehicle. Ask the charity for a receipt that verifies the donation was made. The receipt should include details about the donation and its value, and specifics about the charity including its name, address, telephone number, contact names, and any pertinent tax exempt numbers or paperwork.
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