A Checklist if You Want to Donate Your Car

It’s safe to assume that everyone has a charitable organization that they stand behind. For most, signing a check is a great way to fund the organization and support a cause that you believe in. But if you don’t have a thick pocketbook, donating a vehicle can be another way to support the charitable organization and receive a donation receipt. 

Kars4Kids, UNICEF, The Salvation Army, The ARC, and several other charities operate car donation programs nationwide. But while it can be a quick and easy way to empty unwanted vehicles from your driveway, it isn’t always everything it’s cracked up to be. 

“However well-advertised and popular car donation programs may be, it often has challenges that donors don’t realize initially,” says CarBrain COO Marcin Ladowski. “The cost of towing your junk car can come off the top of the donation amount, for example. As well, donors don’t always get to claim the fair market value of the vehicle. Like all transactions, it’s ‘buyer beware’ – or donor beware, in this case.”

If you want to proceed with a vehicle donation, tick off each of these items to ensure you stay on the right side of the law.

Determine Your Car’s Value

Establish your baseline value before starting the donation process. What you want to know is how much your car is worth if you were to sell it ‘as is’. For cars in working condition, it could be a NADA Guides value or the fair market value (FMV) on KBB.com. For junk cars, the value is substantially less than any book value, so it’s less important. 

It’s at this juncture that you need to decide, “Is there better value in donating this car or in selling it and donating the cash?” In nearly all cases, the better value is selling the car and donating cash. But when the difference doesn’t balance out the hassle of selling a car, then a donation may still be preferable. 

Find a Charity

In the United States, a charitable organization that can give you a tax receipt for a vehicle donation has to have a 501 (c) (3) designation. Without that, you’ll simply be signing over the title for no value whatsoever. The exception would be faith-based organizations – they’re able to do the deal without having to qualify for the designation.

Ask How the Donated Vehicle will Be Used

Again, the car’s value is a baseline and is seldom the amount you’ll receive on a donation receipt. Your receipted donation is based on how the charity will use the donated vehicle. 

If the charity sells donated vehicles at auction, the value is likely to be significantly lower than FMV. However, you’re only eligible to claim the amount the charity receives from auction proceeds. 

If the charity decides to make improvements before selling the car, your car is sold to a low-income recipient at a discounted price, the charity decides to keep the car for their own use, or it’s worth less than $500, you can claim fair market value for your donation. 

Transfer Title

When you’re donating a car to charity, the title transfer should be completed as if you were selling the car privately. While there isn’t any money changing hands, possession of a valuable asset is still occurring. 

If the title is not transferred out of your name, you remain liable for the vehicle. For instance, a vehicle you donate that is involved in a criminal activity could make you liable for damages. Or if speeding violations or parking tickets are accrued, you may be on the hook to cover the costs.

Your title transfer should include the organization’s name in the ‘buyer’ section. If the non-profit you selected asks you not to fill in their information, it should raise a red flag. Make it a condition of your donation or find another organization to donate your car to.

Follow Up with Sale Amount

Since the amount you can claim as your donation amount is only the amount your car is sold for at auction minus fees, it’s imperative that you know the amount. Charitable organization will issue donation receipts but it’s a great idea to be in communication with the charity about when it will be sold, then to find out how much the sale brought after it’s completed. 

Track the sale amount and compare it to the donation receipt you’ll receive. If there are any questions or concerns, ask the organization before filing your taxes.

File the Right Forms

Any non-cash donations can be a reason for the IRS to audit your return, so you want to ensure you’ve done everything possible to get it right. 

  • For a vehicle valued below $250, keep written records for your donation. You may not receive a receipt from the organization if it’s under $250. 
  • Any vehicle donations above $250 need to have a written acknowledgement of the value from the organization. 
  • If your car was worth more than $500, it’s required that you fill out section A of IRS Form 8283, Noncash Charitable Contributions.
  • And if your donated car is worth more than $5,000, section B on Form 8283 must also be completed along with an appraiser’s valuation.  

Donating a car helps a charity perform much needed community work. Determine if it’s in your best interest to donate a car, and follow this checklist to ensure it’s done correctly. 

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