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Why You Might Want to Donate Your Car to Charity

Brought to you by: Beacon
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Thanks to billboard ads and promotional messages on public radio, more people are starting to think about charity car donations. Whether you’re looking to give back to your community or just trying to get rid of an old car, donating a vehicle may offer you several benefits.

“Donation is an easy and fast way to get rid of a car,” says Marcia Rundle, director of Cars for Homes, a program that facilitates vehicle donations to Habitat for Humanity. “You can do something good for the charity you support and get a tax deduction at the same time.”

Before you hand over the keys, though, consider the following:

The car's value

While any tax deduction is worth something, the tax break for your car donation may be less than you expect.  Most charities sell donated cars at charity car auctions and use the proceeds to fund their operations. You can only deduct the selling price from your income taxes. However, in this scenario, your car is likely to be sold for a lower price than you would receive if you sold it privately.

Some charities choose to keep donated vehicles and either give them to needy families or use them in their own operations. In this case, you can deduct the car’s full fair-market value as determined by services such as Kelly Blue Book.

The charity you want to help

When determining where you’d like to donate your car, think about your own philanthropic priorities. For example, you may be interested in supporting the environment, or you may have a specific local or national charity in mind.

In either case, it’s critical that the organization you choose accepts car donations and is a tax-exempt nonprofit organization, as determined by the Internal Revenue Service.

Once you identify a specific charity, check to see how it uses donated vehicles. If you’re choosing between multiple charities whose missions you support, consider selecting one that does not sell donated cars so you'll likely get a larger deduction.

The paperwork you'll need

To claim your deduction, you’ll need the right documentation, such as a clean title. (The charity you choose can tell you specifically what they require.) Ask the charity for a receipt that details exactly how much money it received as a result of your donation. If the charity keeps the vehicle, you only need a receipt if its fair-market value exceeds $500.

Consult your tax professional if you have any questions or concerns about how to document and claim your car donation. “Your car may be one of the biggest assets you own,” says Rundle. “You want to know that someone is going to handle the car donation properly and that the money is going to a good cause.”

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.