Charity car donation programs are growing and it's easy to understand why. Auto donors can get rid of an unwanted vehicle, support their favorite charity and get a tax deduction. However, warns Guidestar in "All Car Donation Programs are Not Created Equal" (August 2004), "vehicle donations to charity don't always work out that way."
Donate Auto Only After Doing Homework
For a potential vehicle donor, the most important factor is often the tax deduction. First, be sure the charitable organization is designated by the International Revenue Service (IRS) as a 501(c)(3) organization. Check a website like guidestar.org to be sure the nonprofit organization qualifies. Certain other organizations may still be able to offer a car donor the appropriate tax deduction, but always verify ahead of time to avoid costly mistakes.
Car donors will only get the benefit of a tax benefit if they itemize deductions on tax returns and charitable donations are only allowed up to a certain amount. Check with a financial advisor or the Internal Revenue Service to address any questions or concerns.
Money to Charity Varies by Vehicle Donation Program
Some car donation programs funnel money to charities only after taking a significant cut for administration. "Even the most reputable of the agencies that handle these transactions keep nearly 50% of the car's value for their troubles (other, less scrupulous entities keep 90%, or even more)," notes Charity Navigator in "Guide to Donating Your Car: You Don't Have to Write a Check to Help."
On the other hand, donating a car directly to a charitable organization will ensure the charity gets all of the profits from the sale of the car. If a donor decides to use an intermediary organization, check to see just how much of the money will actually go to the charity.
Also, the donor can and should deliver the car if it runs, suggests Laura T. Coffey in the Sept. 10, 2008 TODAYshow.com article "How to Donate a Car or Boat to Charity: Be Sure Your Well-Meaning Act Really Helps Charity and Your Tax Bill." By dropping the vehicle off themselves, auto donors will save charities the cost of towing.
Take Care of Charity Car Donation Paperwork
As it relates to the value of the tax donation for the car donor, getting a receipt for the donation should be a top priority. The IRS will want to know the fair market value of the donated auto. If the car is worth less than $500 or if the charity keeps the vehicle for its own use, fair market value can be determined by checking on car value listing sources like the Kelley Blue Book.
If the car is worth more than $500, there's an additional form (8283) to attach to the car donor's tax form, says Coffey. The donor will need the charity to provide the exact amount of the car's sale price. If the vehicle is worth more than $5,000, the IRS will want an outside appraisal.
In all cases, be sure the title is transferred legally and correctly. This protects the donor from liability and should be part of the donor’s paperwork for the transaction.
Donating a car can be an exciting alternative to a cash donation to a nonprofit organization, but potential donors should be sure their gift will have the maximum impact to both their own tax return and to the charity's bottom line.
Molly Schar - With more than a decade of experience in fundraising, communications and nonprofit management, Molly Schar has worked with mission-based, ...
