Donating a car is one of the most cost-effective ways to help a charity, but many people shy away from doing it because they don’t know how to go about it. Other drivers simply wonder if it is better to junk a car or donate it.
When giving to charities, most are driven by the desire to help others or help solve a problem. Although that’s also the case with donating your car, in this case you can also gain from tax deductibles.
All that being said, the car donation industry as a whole is riddled with fraud and deception. Many scammers want to make a quick buck by exploiting car owners, but this article will tell you about steps you can take in order to avoid them.
Understanding Charities that Handle Car Donations
A lack of transparency is among the things that may discourage one from using this method to do charity work. At the same times, some people don’t care about what happens to the money from their car once it has been sold. Instead, what's more important to them is the tax deduction that they can receive.
Before you donate your car, here are a few things you can do to conduct due diligence.
Do a Thorough Background Check on the Charity
If you concerned about where the proceeds from your car will end up, spend some time reading reviews about different charities. Also, make sure that they have a 501 ©(3) non-profit status.
Look for Efficiency
You can use Charity Watch to find charitable organizations that have good reputations and efficient processes.
Itemize the Car Donation
You will need to itemize your car donation in your tax returns in order to take a tax deduction for it. The amount that you will be able to claim will vary based on what the charitable organization sold the car for, but not the market value of the car.
In the event that the charity keeps the car or sells it at a greatly discounted price to someone in need, you will be able to claim the fair market value of the car. Usually, charitable organizations will sell their cars at public auctions for much cheaper than the fair market value.
Get a Receipt from the Charity Once the Car Has Been Sold
You will need to attach documentation to make tax claims on your car donation, especially if the car was sold for over $500. Charitable organizations are required to issue a receipt within 30 days after selling the car.
File the Appropriate Tax Form
There are different forms that you will need to fill out once you have the receipt.
If the car was sold for less than $500, you will have to complete section A and file form 8283 with the IRS. If the car was sold for more than $5,000, you will need to fill out form 8283 andcomplete section B. You will also need to submit an independent appraisal.
Lastly, it is important to drive the car to the charity yourself and take pictures of it once you get there. This way, if anything happens you will have evidence of your car donation.
Where to Donate Your Car
Kars4Kids is one of the most popular and reputable charitable organizations that take car donations. This non-profit organization is based in Utah and claims to provide comfort and monetary support to critically ill or injured children.
On their website, they state that they have received over 450,000 car donations in their lifetime. On the other hand, Cars4Kids’ integrity was questioned when it was discovered that 50% of their received donations do not directly help kids.
In their defense, Kars4Kids claimed to be channeling the other funds to administrative tasks that keep the organization running.
Other Reputable Non-Profits
Other non-profit organizations that handle car donations include the Kennedy Krieger Institute and Vanguard Charitable.