Most of us have heard the catchy radio jingle: “K-A-R-S, Kars for kids, donate your car today.” But have you ever considered making a car donation to a nonprofit? What does it mean to donate your car? And how do you do it? How much will the charitable organization receive for your car donation?
If you’re trying to get rid of an older car, you may quickly realize that you may not make much on a private sale or trade-in. Donating your car could be the best option. You’ll save time, stress and hassle, gain tax benefits and help a charity with your car donation.
Kars4Kids is just one vehicle donation program – and possibly the most well-known. But the fact is, you have multiple options if you decide to donate your car. Read on to learn the myriad benefits of car donation, how to donate and what you’ll need for a successful transaction.
Benefits of Donating a Car
If you have an older car, you may find that the trade-in value of your vehicle isn’t worth your time or energy to try to haggle with a car dealership. If your vehicle doesn’t run or is in poor condition, it could cost you more to tow the vehicle to the dealership than you would actually receive for it as a trade-in.
If you’re considering selling your car privately, you may find it hard to get fair market value for the vehicle. And if the car has hidden problems, you may not want the hassle of an angry buyer who thinks you knew about the issues and didn’t disclose them.
Although private sellers don’t have to provide a warranty for a used car, they are not allowed to lie. But if there is a problem with your vehicle that you didn’t know about, the buyer can try to come after you, even if they aren’t likely to win in court. For some people, the hassle of selling a used car privately just isn’t worth it.
Donating a car rather than selling it or trading it in has three big advantages:
- Tax benefits in the form of a tax-deductible transaction
- No hassle over the value of your car
- The knowledge you are doing something good to help others
Most car donation programs even pick up the vehicle from your home, so you don’t have to worry about towing the car if it doesn’t run.
Where to Find a Vehicle Donation Program You Trust
A Google search of “vehicle donation program” or “car donation” turns up more than 282 million results, with Kars4Kids at the top of the ads list. The organization 1-800-Charity Cars, named after its toll-free number, is another well-known source for car donation programs.
When you’re looking for a charity to donate your car, consider how much of the value of the vehicle goes to help those in need and how much goes toward administrative costs for the charity. You will also want to consider where the money goes.
You may prefer that your charitable donation goes to help veterans, terminally ill children, victims of domestic violence or even animals.
You may be able to donate directly to a charity of your choice, or you may go through an organization that manages the sales of donated vehicles and then distributes the money to the charities. Whatever charity you choose, make sure it is a 501(c)3 organization to ensure you can claim a tax deduction for your contribution. Search the organization’s name through the IRS website's Exempt Organizations Select Check to find out if it is a tax-exempt nonprofit organization.
You may want to find out what percentage of your donation goes directly to help those in need and how much goes toward administrative costs for the organization. Some nonprofit organizations donate up to 90 percent of the revenue to the charity for programs.
Some organizations donate vehicles in good condition directly to families or individuals in need. More commonly, the organization sells the vehicle at an auction and then either donates the money to a charity or uses the money directly to fund programs that help those in need.
What the organization does with your car will make a difference in how much money you can claim as a tax deduction. If the organization donates your car to a driver in need, you may be able to claim full market value as a tax write-off.
Otherwise, the organization may sell the vehicle at auction. They will give you a tax receipt for $500 for your initial contribution. If the vehicle sells at auction for more than $500, you’ll receive an additional receipt showing the sales price. The sales price represents the amount you can deduct as a charitable contribution on your state and federal taxes.
If it is not in drivable condition and can’t be repaired affordably, they may sell it for parts and scrap metal. Then, you can value the donation at up to $500.
When you’re shopping around for a car donation program, find out how much you’re likely to get for your donated vehicle.
Understand the Car Donation Process
Once you’ve selected a vehicle donation program, the car donation process is simple. Most organizations advertise that you can donate a car in a few easy steps. You can either call the organization or fill out the donation form on the organization’s website.
You may need to provide your name, address, phone number, email and the following information about the vehicle:
- Approximate mileage
- Mechanical condition
- Body condition
- Interior condition
- Condition of brakes and tires
The organization will also want to know if your vehicle runs or if it will need towing. Some organizations may require the Vehicle Identification Number (VIN), and they will want to know if you have the title or not.
You will need the automobile’s title to show that you are the owner of the car to donate it. If you don’t have the title, you can contact your state’s Department of Motor Vehicles to obtain the title. You may also need paperwork to complete a title transfer.
Once you’ve filled out the information online or called the organization, they can usually arrange to pick up the vehicle on the next business day. You’ll want to get your car ready for pickup.
Empty all your personal items from the car and remove the license plates, registration sticker, inspection sticker, registration card and your insurance ID cards from the vehicle.
Fill out the title to transfer ownership of the vehicle. Do not leave the “new owner” section blank on the title form. Depending on the state you live in, you may have additional forms to fill out from the DMV.
Make sure to confirm the identity of the person who picks up your car and obtain a receipt for tax purposes. If your donation equals more than $500, the organization should also fill out IRS Form 1098-C, file that form with the IRS and provide you with a copy for your tax returns.
How to Claim Your Tax Benefits for Car Donation
Although organizations make it easy to donate your car, it is not quite as easy to claim the tax deduction for your charitable contribution. Individuals can only deduct charitable contributions if you itemize deductions on Tax Form 1040, Schedule A. Tax deductions can reduce the amount of taxes you owe or lead to a tax refund.
Read more: Tax Return Changes
IRS Publication 4303, A Donor’s Guide to Vehicle Donation outlines tax law surrounding the car donation process and the steps you should take to claim your tax deduction for your donated vehicle.
If the value of your donation exceeds $500 but is less than $5,000, complete Section A of IRS Form 8283 and attach it to your 1040 form when you file your taxes. If the value exceeds $5,000, complete Section B of the form, which must be signed by an authorized official from the charity.
If the deduction exceeds the gross proceeds from the sale of the vehicle and is over $5,000, you’ll also need to submit a written appraisal of the vehicle to the IRS.
Make a Difference with Your Donated Car
If you are looking to increase your tax deductions while helping others, donating your car is one solution. You’ll eliminate the stress and hassle of trying to sell your vehicle privately or trade it in to a dealer for potentially less than its fair market value.
Of course, you want to ensure you and the organization receive the maximum value possible for your donated vehicle, both to help the charity and maximize your tax deduction. Shop around until you find an organization that you feel comfortable working with and follow the car donation process to ensure you get the tax benefits you deserve.
Dawn Allcot is a full-time freelance writer, content strategist, and founder of GeekTravelGuide.net, a travel, technology, and entertainment website. A seasoned finance writer, her work has appeared on Forbes, Bankrate, Lending Tree, Solvable, Moneycrashers, and many other personal finance sites, including the award-winning Chase News & Stories portal. With more than 20 years editorial experience, Dawn seeks to take complex concepts and simplify them for today's busy readers. Whether she is writing about taxes or technology, her goal is always to educate, inform, and entertain.