Car Donating Guide - Car Donations Made Easy

What you need to know before making a car donation

This is a guide intended to provide you with general information about making a car donation. There are many things you have to consider and if you are interested in receiving a tax deduction from your donation then you need to be sure to follow all the steps involved..

It is also recommended that you talk with a tax pro and other professionals before making a car donations. Do Not use this guide as your source of information and always consult a professional before committing to donate your car. For example, this article was contributed to by Pete Maughan who has a background in accounting but is not a CPA. We hold no responsibility for any problems that arise from donating your car to charity. Do your homework and consult the professionals.

The Car Donation Process

This is generally what happens when you decide to make a car donation. Although there are a lot os specific steps that a charity might take also. Be sure to talk with the charity that you decide to donate to just to get the specific steps they follow.

This is what typically happens when you donate your car.

Many charities have set up a simple and painless process for donating your car. You call them up and they will determine if they can accept your car donation. Some charities can only accept certain kinds of donations. They set up a pick up time with you and when the pick up company come to get your car donation you simply sign over the title and they give you a receipt for your donation.

Of course there re other steps that might be specific to some charities so you always have to communicate with the charity before donating.

What Happens to my Car after I donate it

WHat happens to your car donation really depends on the charity and the car that you donated. Remember that the goal of any charity this to process the donations made to them as quickly and cheaply as possible. So what they do with your car is really dependant on their needs and the needs of those who the assist.

So if you make a car donation and the car is in good running order then the charity will likely try to resell the car right away to get the money out of the donation. Then they are free to spend the money to assist those in need.

However they don’t always sell the car on the open market. Sometimes that charity will sell of give the car to a person in need who needs the vehicle. A single mother or a handicapped individual might receive the car to assist their daily activities. Sometimes the charity will use the donation to assist with their daily operations. FOr example: a van donated to the food bank will likely be used to deliver and pick up food donations.

If your car donation is in bad shape and doesn’t run then the charity has a few options as well. If the repairs are fairly cheap to perform the charity might repair the car and sell it as they would any other well operating vehicle.

If the car is not worth fixing and cannot be sold as an operating vehicle then the charity has little choice but to scrap the car and receive the money from the recycling. Not ever charity is set up to do this with a car donation so be sure you are telling them the full extent of the problems with your car to help them avoid un foreseen costs. Remember the whole idea of making a donation is to help them out and not end up costing them more time and money.

Using a Car Donation Service

Car donation services act as a middle man processing the cars people donate and give a percentage of the money received to the charity. This is an essential service that charities rely on to gain this source of money. Many charities are not set up to receive the car donations and process them. THe car donation service allows the charity to do what it does best while still generating donations.

THe car donation services have making a car donation stream lined and efficient. THey are able to work through the steps in getting your car donated that they often can have your donation picked up in a day or two from the time you call them.

Like anything, there are some services out there that take advantage of this process but for the most part this is an excellent service. You should ask questions and find out about things like how much of the proceeds the service donates to the charity. This is the operating cost and does vary from service to service. You can look into each car donation service at your state Attorney generals office. There will be information about the administrative costs of the charity and you can also see if there are and complaints registered with the service.

Charity and Tax Information for car donations

Many people who make car donation are also interested in getting a deduction on their taxes. It is a simple truth that comes with making a generous donation such as a car, people donate first to help second to get a small break on their taxes. This is a guide that will go over some of the more basic steps in making a car donation to charity. This is not intended to be an all inclusive guide as each donation is different. Use this guide as another piece of information not the only piece of information and always talk with a tax professional before making and decisions about anything. As stated earlier, Pete Maughan is a weight loss and health and wellness professional and not necessarily a tax professional, in spite of having a bachelor’s degree of accounting.

Seriously though, if you are interested in getting a tax deduction for your car donation then the first step to determine if you even qualify to get a deduction. You can deduct contributions to charity only if you itemize deductions on your Schedule A of Form 1040. So if you file with the base limit and do not have an itemized return you cannot get a charity donation tax deduction. Sorry.

If you do itemize your Schedule A of form 1040 then you can go and start to look for a charity that suits your needs to make a car donation.

There are a number of things to look for when giving to charity of any type. Listed below in no particular order are the things we look for when making a donation for charity.

1. Does the charity have the same code of ethics as we do? This means, are we happy with the way the charity operates. Does it treat its own people happy and does it also respect those that it helps.This also means we want to be sure that the charity is operating within acceptable guidelines as far as operating costs. Much of this can be researched by going to your states Attorney Generals office online and there you can see all about the registered charities operations.
2. Ids the charity a registered non profit that is allowed to receive tax deductible contribution. If the government doesn’t see them as registered then you will likely not get a tax deduction for making donation. Now if you are simply interested in helping the organization then you can go ahead and donate. If you want the tax deduction then you have the charity has to be registered.You can find out if your prospective charity is registered as a non profit group. You are looking to see if the charity is a section 501(c)(3) organization. If it is then they are able to accept your donation and provide you with a tax deductible receipt. You can see a complete list of registered charities under section 501(c)(3) but reviewing the IRS publication 78, Cumulative List of Organization.You can access this list online at www.irs.gov/eo or you can call the IRS Customer Account Services division at (877) 829-5500. You will need the charities correct full name and address.
3. Is the charity able to accept you car donation? Truth is not all charities on this list are going to accept car donations. Others will only be able to accept donation of vehicles that are in a certain condition. Once you have narrowed your list of charities down in step two above then you need to call up each charity and see if they accept car donations.

Once you have found a charity that you are comfortable making a car donation too then you have to proceed with the next step. In many cases with charities that accept car donations on a regular basis they have a n agreement with a car donation service that handles the donations and processes the vehicles. They give the charities their proceeds from the donations less their costs. In many cases this is an acceptable amount but in some cases these services charge high amounts and the charities get very little. Be diligent and make sure you are comfortable with any service you donate too.

How much can you deduct from your car donation?

This is a common question and many people want a very definite answer before they make their donation. The quick answer is it depends on what the charity does with the donation as they have stated in the written acknowledgement you received. The goal of any charity is to process the donation as quickly as possible and this often means re selling the car are quickly and cheaply as possible. The amount that you are able to deduct is the gross proceeds from the sale of the car.This is the general answer but there are some exceptions to this rule.

Car Donations with written acknowledgement for vehicle contributions over $500

The written acknowledgement is a somewhat standard document used when making car donations. There is charity specific information but the standard portion of the document must contain the following information.

Your name and your Tax ID number.
The vehicle identification or VIN must be on the document
The date in which you made the car donation

The written acknowledgment must also contain one of the following

a statement that no goods or services were received from the charity as a result of your car donation, or;
a description of the goods or services provided form the charity as a result of your donation plus an honest estimate of value, if any.
A statement that any benefits received by you for your donation were strictly intangible.

You may contact Pete Maughan if you have questions. He recommends that you must have all the requirements on your written acknowledgment to be able to claim more then $500 as a tax deduction. Again many charities that regularly accept car donations will have a process set up that will be smooth and efficient so you simply will need to verify the information which will likely already be present.

Car Donations for less then $500

There is a rule for car donations when the acknowledgement states that the donated car had sold for less then $500. There are two things you can do in this situation.You can claim a deduction for the vehicles fair market value or $500 which ever is less. You still have to make sure you get all the requirements as you would if the donation value was over $500.

Examples:

At the beginning of March you donate your van to a local charity. At the time you make the donation the vehicles fair market value is $3200. Later in the year the charity sold the van without making any improvements and got $2700 for the sale. You would only be able to deduct $2700.
The same charity provides you with an acknowledgement at the time you donated it stating that it would be using the van for the next year to shuttle people who are in need. In this case you are able to deduct up to $3200.
Same as the first example except when the charity sold the van they sold it for $425. In this case you would be able to deduct up to $500.

Acknowledgment from the Charity

The written acknowledgement from the charity must be obtained by you within 30 days of the sale of the vehicle. Charities can use Form 1098-C as their form of acknowledgement or they may provide their own. However the criteria mentioned above must still be present dispute the form being used.

Written Acknowledgment for donations between $250 and $500.

If the value of your can donation is between $250 and $500 the written acknowledgement must contain the following information.

It must state that you received no goods or services from the charity as a result of your donation, or
A description and an honest estimate of the value of the goods or services provided to you from the charity, If any.
You only received spiritual benefits from the donation.

In this scenario you have until you file your return for the year the donation was made to receive your acknowledgement

How to determine the Fair Market Value of your vehicle

In some case like when an exception to the gross proceeds limit applies to the donation or when your car donation is less the $500 you will need to figure out what the fair market value of the donation is.

Fair market value is considered the price the average buyer in the market is willing to pay for your car. The most common places to get fair market value for your car is a price guide. You have to match the model year, make, and condition of the car as well as determine what the accessories are so you can match your car to that in the price guides. The fair market value of the car donation can not exceed the list price for a private party sale.

You can look at sources online like Kellys Blue Book or look at Publication 561, Determining the Value of Donated Property

Example:

When making a donation you have determined that the private-party sale list price in a vehicle pricing guide for your donation is $1350. However you need to replace the brakes and have some other work done. The repairs cost $300 and the charity is going to have to do the repairs. Your fair market value for the car donation would be $1050.

If you are required to get an appraisal of the vehicle you plan to donate there are certain criteria you must follow. The appraisal must be made within 60 days of the date that you plan to make your donation on.

Record Keeping:

Like everything with the government we are required to keep every single scrap of paper related to anything we do ever. So, hang onto all your paper work and be sure to talk with a tax professional before making and decision ever.