You must first ensure that the charity accepting your vehicle is registered to accept tax deductible contributions, and also make sure you get a receipt to prove that the donation was made.
On receiving this proof, you can safely hand over your vehicle and then claim its value against your next tax return. Make sure that you have records of the value of the car, because this type of donation might well result in an IRS inspection to make sure that the value you are claiming was the true value of your vehicle when it was donated.
When you donate a car to charity, the cars that are donated can be of two types: those still in good working order and those useful only for scrap. Here is how each type of car will benefit both you and the charity:
1. Scrap Cars
What benefits do you get by donating a scrap car apart from the warm glow of helping a charity to help others? You get the benefit of having your old vehicle removed free of charge, and also of knowing that it will be put to good use in the recovery of the steel to build new vehicles. The oil is also recycled, and it has been estimated that Car donation charities contribute significantly to over 10 million gallons of oil that is recycled each year by the auto recycling industry.
You can also claim a sum against tax for the scrap value of the car. Generally, you have no work to do when you offer your car to car donation charities. They arrange the collection of the vehicle, provide you with documentary evidence of the donation for the IRS, and that’s about it! It’s a very simply process, which is why so many individuals and businesses are pleased to use such services.
Many people are under the mistaken opinion that they get paid when they offer their vehicle for scrap. On the contrary – you generally have to pay the merchant to take it away, and that is why car donation charities are so popular and so successful. They not only save people money in remove their scrap cars free of charge, but they can also make money due to the volume of scrap metal and oil they are handling.
2. Functional Cars
Many cars received by car donation charities are in working order, and in this case the donor receives a tax deduction equivalent to the sale price of the car. If the charity decides to use the car for its own use (saving them purchasing a car) then you can claim the estimated value of the car against tax, and the charity benefits by being able to offer a car to their workers at no cost.
However, if it is sold at auction then you claim the amount for which it was sold. Car donation charities receive amazingly large numbers of cars that are still working, but for which their owners would rather receive the tax benefit by donating it rather than accrue more tax by selling it.
The Legal Aspects
The legal aspects of a persons donation relate to the IRS (who else!). If your car is worth over $500, you must complete Section A of IRS Form 8283. If worth up to $5,000, use one of the recognized books, such as the Kelly Blue book for its market value. For over $5,000. You should get an independent valuation for your car and also complete Section B of Form 8283. Take photographs of the car and retain any receipts you still have relating to parts or tires that have been recently purchased for the car. You can claim for these.
This all might seem a lot of work, but it is not as difficult as it seems and you are getting two major benefits from it:
a) You get the warmth in your heart of knowing that you are helping people less fortunate than yourself,
b) You are getting your old car taken away free rather than paying for it, and
c) You are getting a tax deduction for the value of a car that you might otherwise just have let go for scrap, or maybe sold for a lot less than your tax claim might be.
You can use car donation charities to your benefit if you understand how, and we will show you exactly what you must do to take advantage of each of these benefits. You have surprisingly little to do when you donate a car to charity, because the charities do most of it: they collect your car, dispose of or sell it, and we help you every step of the way to make sure you’re getting the best for you.