Top 5 Tips for Donating a Car
Car donations are increasingly becoming popular for being a way to donate to a charity and also for getting tax deductions. Unfortunately, although there are many trustworthy charities that accept car donations, there are many middlemen who try to get highest amount of profit out of your donation. With that being said, here are some five tips to get the most value out of donating a car.
Tip #1: Choose the Right Charity
First and foremost, verify whether or not if the prospective charity accepts car donations. If they do, determine what they’re going to do with it afterwards. For example, are they going to use it for deliveries, or are they going to sell it and put the profits towards charities? If they do donate it to charities, ask them about the percentage that will go towards their own organization.
You should always inquire with them to see if they are able to receive the donations as tax deductible contributions, because if they don’t, you can be losing out on a lot of tax savings. If you are unsure as to whether or not if they are eligible, then request them to show you an ‘IRS Letter of Determination’ letter, which is the primary method of valid verification.
Tip #2: Avoid Car Donation Companies
Both on TV and on the Internet, you may have come across various advertisements of organizations accepting car donations. These are mostly from middlemen car donation organizations where they can take between 50 to 90% of the profits from each car sale, whereby only a small portion goes towards charities. If you have don’t have a choice but to donate your car to one of these companies, always ask to verify as to how much of the profits they donate to charities.
Tip #3: Transfer the Title with Caution
If you don’t currently have a title for your car, then it is important for you apply for one. Fortunately, they usually only cost a few dollars. Whenever you are signing the transfer forms to release the ownership of the car, make sure to fill in the charity’s name, because if leave that section blank, there could be speeding fines or parking tickets registered under your name without your acknowledgement. When you do process the change, keep the title change records for IRS purposes.
Tip #4: Get a Written Copy of the Vehicle Valuation
For tax deduction purposes, this tip is very important to follow. If your car is valued at more than $500, in order to get tax deductions, the IRS will need a sales receipt from the charity to verify how much they had made.
In the instance your car has a value of $5000 or more, then you’ll need an outside appraisal along with the receipt.
Tip #5: Be Aware of the Specifics
When and if the charity receives over $500 from selling your car, not only do you have to complete an 8283 IRS form, but you must also ensure that the IRS receives the acknowledgement from the charity that your donation was taking place alongside the provided sales receipt. Also, if the car does not sell immediately, you must provide the IRS with the receipt no longer than 30 days from the initial sale.