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Want To Donate Your Car? Here’s Everything You Need To Know

in Car Buying Tips
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Do you have an old car that just sits in your garage and is no longer used? If yes, one of the ways to get it off your hands is to donate your car. By donating your car to charity, not only will you be able to get rid of your old wheels, but you’re also doing so for a good cause. Plus, you may be eligible for a healthy tax write-off.

That’s a win-win, right?

Well, believe it or not, donating your car isn’t as straightforward as people think. This is especially true if you’re looking to get some tax deductions from your donation. Read on to learn more about the ins and outs of donating a car and how you can make the most out of it.

Why Donate Your Car to Charity?

Is it worth it to donate your old wheels to charity? Here are a couple of reasons why you should do it:

Help a Charity You Believe In

This is a no-brainer. You want to donate because you wish to support a charitable institution that you believe in. Most charities will take anything and will be happy to take an old clunker or any vehicle in any condition.

Provided that your car is still drivable, charities can make good use of your old ride. For example, your car can be used for taking people to their doctors, delivering meals, and any other tasks that carry out their charitable missions.


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Get Tax Deductions

Since 2004, the process of getting tax deductions from vehicle donations has become stricter. In fact, the IRS explained that one of the requirements for donors to claim deductions is that the vehicle must have significant intervening use from the charity (more on these later).

For instance, if the donated vehicle is valued at over $500 and the charity sells it, a notice that says it was “sold in an arm’s length transaction between unrelated parties” must be provided by the charity along with the gross proceeds from the sale. If the car is going to be used for charitable missions, the charity must provide a certification of intended use.

Avoid the Hassles of Selling a Car

One of the best benefits of donating your car is that you’re sparing yourself from the hassle of car sales. You don’t have to pay for newspaper ads, advertise on social media, and deal with phone calls or emails. Not to mention the test drives and haggling.

If you wish to donate your car, many charities are more than willing to pick up your old car and tow them away for free.

How to Donate Your Car

The process of donating your car can be as simple as calling your preferred charity and arranging a pickup. In this case, it’s hard to go wrong with larger charitable institutions like Goodwill, Habitat for Humanity, and the Salvation Army, plus they offer dedicated services for vehicle pickups.

The most important thing to remember when donating your car is to do your homework. Only inquire or approach charities that you know and like, and ask them if they accept car donations. Otherwise, you can do your due diligence and search for organizations that need car donations. Research their reputation by checking for online reviews and looking them up on watchdog sites such as CharityWatch.

If possible, steer clear of for-profit intermediary organizations or middlemen claiming they’ll handle your vehicle donation. Ensure that you’re dealing with the charity directly instead of a for-profit entity that may not use 100% of the money in ways you prefer.

Be wary of charities that sound too good to be true, particularly if they promise you’ll receive significant tax deductions if you donate to them. Lastly, make sure that you get a receipt from the organization and fill out the transfer form.


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Car Donations and Tax Deductions

One of the desired benefits of donating a car is the potential to deduct your charitable donation. However, like with all things concerning the IRS, it’s not as simple as you might expect. You can’t just donate your car and deduct its value to your taxes. There are certain requirements before you can deduct your taxes.

If you want to learn more, the IRS has provided an in-depth donor guide on vehicle donations.

Deductions Must be Itemized.

You can claim charitable deductions (including vehicle donations) only if you itemize your deductions. Unfortunately, with the recent changes to taxation laws, you’re better off with standard deductions. Thus, your vehicle donation may not be that big of a benefit during tax time.

Donations Must be Made to Qualified Charities.

Before you can deduct your donation from your taxable income, you must deal with a qualified organization. In this case, you should donate your car to a tax-exempt religious foundation or a 501©(3) organization. Fortunately, verifying the eligibility of a particular charitable institution is as easy as calling the IRS hotline.


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Certain Documents are Required.

After handing off your car to the charity, a written receipt will be given to you. In addition, you may also receive a Form 1098-C which is basically a written acknowledgment of your vehicle contribution. Make sure that you keep this document because you may need it when filing your taxes. Moreover, you’ll also need this document if you’re making deductions of more than $500.

Claiming Deductions at Fair Market Value

If the car’s value is less than $500, you can use Fair Market Value (FMV) for claiming deductions. In any other case, you can only claim FMV under the following circumstances:

  • Instead of selling the vehicle, the charity keeps and uses it for charitable missions.
  • The charity improves the vehicle (major repairs that improve its value rather than a simple paint job) before selling it.
  • The charity donates or sells the vehicle to a needy person at a significantly discounted price.

Otherwise, you can only make the deductions based on the amount after the charity sells the car or as indicated on the written receipt provided by the charity.

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