Donating a car is a way to support a charitable organization while still reaping an economic benefit through a tax deduction. All donors should be aware that tax deductions for used automobiles, boats or airplanes are available only to those individuals who donate to a qualified charity and who itemize deductions on their tax returns. Following are some tips to consider when deciding whether to donate your car to charity.
Do make sure that you are donating to an eligible organization. Tax deductions are available for donations made to §501(c)(3) organizations, public charities which the Internal Revenue Service has determined to be tax-exempt. To verify an organization's qualified status, contact the Public Charities Division at (617) 727-2200, ext. 2101; the IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500; or look for IRS Publication 78 in your local library's reference section or on the IRS website. Churches, synagogues, temples, mosques, and governments are not required to register with the Non-Profit Organizations/Public Charities Division or to apply to the IRS for tax-exempt determination. They may not be listed in Publication 78, but donations to these institutions are tax deductible.
Do ask the charity plenty of questions. Find out what the organization's mission is and how your donation will help it. Ask if your donation can go to a particular program or service that interests you or whether it must go only into the charity's general fund. Do not donate to an organization that avoids talking about its charitable purpose or refuses to send you information.
Do ask what the charity will do with your car. Some charities refurbish cars and give them to people in need. Some technical schools use cars in their auto shop programs. Other organizations simply resell the car or sell its parts and use the proceeds for their charitable purposes.
Do ask if the charity handles all aspects of your donation. Many charities contract with for-profit companies to handle all the details of motor vehicle donations. If this is the case, ask how the money from your car donation is split between your charity and the for-profit company.
Deduct only the amount allowed by law. Section 884 of the American Jobs Creation Act of 2004 added sections 170(f)(12) and 6720 to the Internal Revenue Code and changed the rules for donations of motor vehicles, boats, and airplanes beginning in 2005. There are different rules concerning deductions, depending on the value of the car and on whether the charity will keep and use the car or whether it will sell the car (or its parts). The IRS has published "A Donor's Guide to Vehicle Donations" (Publication 4303), which details the new rules. You can obtain Publication 4303 from the IRS at your local IRS office, or by calling 1-800-TAX-FORM (1-800-829-3676), or from the IRS website.
Do have your motor vehicle appraised by a qualified professional appraiser if it is worth more than $5,000.
Do make sure you have the title to your vehicle. A charity should not accept your donation without a title. To obtain a duplicate title, visit your local Registry of Motor Vehicles branch or visit the Registry's website.
Do take responsibility for transferring the title at the time of the donation. An assignment of title should be made only to the charity or an authorized private, for-profit agent of the charity. The for-profit agent of the charity should be subject to the charity’s oversight in order for the agency to be valid for tax-deductibility purposes. The IRS has published "A Charity’s Guide to Vehicle Donations" (Publication 4302), which details the required terms of the agency relationship. You can obtain Publication 4302 from the IRS at your local IRS office, or by calling 1-800-TAX-FORM (1-800-829-3676), or from IRS website.
On the back side of your title, you should assign the title to the charity or an authorized agent of the charity, enter the correct mileage from the odometer, and sign and date the form. Be sure to make and keep a copy of both sides of your title.
Do maintain a personal record of your donation. Items that should be included in your record include:
- The written contemporaneous acknowledgment from the charity;
- The name and address of the organization to which you contributed;
- The date and place where your vehicle was picked up;
- A reasonably detailed description of the donated car or a photograph of the car;
- The fair market value of the car at the time of the contribution and how that value was calculated;
- A signed copy of the appraisal, if the motor vehicle was appraised;
- Any terms or conditions attached to the car donation;
- How you obtained the car (by purchase, gift, inheritance, etc.) and the date; and
- A copy of your title, registration, and any receipts you are given by the tow company or the charity.
Do contact the Non-Profit Organizations/Public Charities Division of the Attorney General's Office at (617) 727-2200, ext. 2101, if you think that an organization is illegally posing as a charity or using deceptive advertising to solicit donations.