Donating a car is a way to support a charitable organization and benefit from 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.
Make sure that you are donating to an eligible organization
Tax deductions are available for donations made to organizations that the Internal Revenue Service has determined to be tax-exempt under §501(c)(3) of the Internal Revenue Code. To verify an organization's qualified status, you can:
- search for the organization on the IRS website to determine whether it is on the "Publication 78 Data List" of organizations eligible to receive tax-deductible charitable contributions here; or
- contact the IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500.
Churches, synagogues, temples, mosques, and governments are not required to register with the Non-Profit Organizations/Public Charities Division or apply to the IRS for tax-exempt determination. They may not be listed in Publication 78, but donations to these institutions are tax deductible.
Ask the charity plenty of questions
Visit the charity’s website. Review its annual financial filings, available here, and its IRS Form 990, which should be available at the above link and here. Consider checking on the charity with an independent charity rating agency, such as the Better Business Bureau's www.Give.org, www.charitynavigator.org, or www.guidestar.org.
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.
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.
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.
Steps to take before donating your care
Have your motor vehicle appraised by a qualified professional appraiser if it is worth more than $5,000.
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.
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.
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.
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.