Donating Your Car? Steps For A Positive Experience And Mutual Benefit
An old car takes up space and continuously depreciates. If it isn’t used regularly, your investment can turn into a maintenance nightmare. Selling is always an option, but getting anywhere near a fair price takes a significant time investment in research and marketing. As a result, some people decide to donate their vehicle to charity for the tax deduction.
What seems like a simple process, delivering the car and claiming a deduction, is a bit more complex. Take the time to investigate some important considerations before donating your car. The small investment in reading this article helps to protect you from common mistakes, including ones that may endanger your access to the deduction.
Check the Charity
For a deduction to apply, charities need to be registered as 501(c)3 or religious organizations. Besides this crucial piece of information, you also need to know what they intend to do with the vehicle. For cars valued over $500, per the Kelly Blue Book and a visual inspection, your deduction can go one of two ways. If the charity intends to use the car, you can claim full value. If they sell it, you can only claim the selling price.
Traffic citations handed out by an officer are attached to the individual receiving the citation. However, many cities now use electronic surveillance to issue citations, and parking tickets are always attached to the vehicle. If the title is still in your name, you could end up liable for surprise costs. You should re-title the car to the charity upon transfer, and never leave ownership in doubt. Another important step is to cancel the registration and car tags still in your name. Contact your local DMV for specific instructions.
Necessary Tax Documentation
Though unlikely, the IRS does perform audits on a percentage of filers every year, and you could be next. If the charity intends to keep the car, they must give you a deduction amount within 30 days in writing. This will be based on an appraisal. If they intend to sell, the written acknowledgment should arrive within 30 days of the sale.
The letter is for your own documents. When it comes time to file, deductions under $500 can be itemized in the usual manner. Deductions from $500 to $5,000 will be filed using Form 8283. If your deduction exceeds $5,000, the same form applies, but you will also require a letter of independent appraisal.
Steer Clear of Intermediaries
You don’t need help donating your car to charity, but this hasn’t stopped for-profit companies from marketing the service. They keep a percentage of the car’s value for the service, which cuts into the charity’s receipt from the donation and your deduction. With a typical percentage between 50 and 90 percent of the value, this is a cost no one needs. Using these services can also disqualify your deduction.
Donating your old car is one alternative to selling. You will receive a tax deduction and the intangible benefit of having helped a favorite cause. Avoid common mistakes to ensure everyone benefits from the transaction.
Jayne Dominick blogs for Cash for Trucks, a company that will buy your old car or truck. If you are trying to decide whether to sell or donate your automobile, visit the company website for more information.