How to donate a car?
Currently, donating used cars to charity is one of the methods Americans use to get rid of vehicles they no longer want.
However, if you have thought about donating your old car to get a good tax deduction, you should proceed with great caution.
Keep reading, below we will explain how to donate a car.
donate a car
Many people believe that this is a simple procedure that can help them avoid the headache of having to sell or junk the car.
In addition to helping a charitable cause, you can reduce your tax burden by disposing of your junk car this way.
Unfortunately, this alternative very rarely allows everyone to win. Charities get only a small portion of the proceeds from a used car sale, and donors can run afoul of the tax man if they aren’t very careful.
Read also: How to insure your car in Quebec
Donating a car could be one of the least profitable ways to help a charity.
The car donation industry is riddled with fraud and deception. Companies are being investigated in several states for false advertising and illegal dealings.
Disadvantages of donating a car
According to Stephanie Kalivas, an analyst at CharityWatch , an organization that monitors the charitable giving industry, donating a used car might be the least profitable way to help a charity.
The problem is that the industry is riddled with fraud and deception . Attorneys general in several states have investigated car donation charities for false advertising and self-verification.
Many of the organizations are for-profit brokers who give token contributions to a participating charity. Others misrepresent the cause they support and/or give low percentages of the funds raised.
Kars4Kids, for example, a New Jersey-based organization with bland but highly successful advertising, has received more than 450,000 car donations, according to its website.
However, the organization received a D rating from CharityWatch because it distributes less than 50 percent of the money it receives and because, despite a national advertising campaign;
it does not adequately disclose that the money is intended to benefit only Jewish children, and almost exclusively in the New York/New Jersey area.
“They are not transparent about what they do,” Kalivas said. “Many of these organizations mislead the public and people need to be careful.”
Wendy Kirwan, director of public relations for Kars4Kids, said the car donation program’s marketing and operating costs are high, but because the organization processes donations in-house;
more money goes to its charitable work than others. that use third parties. She also said that while the organization’s advertising doesn’t explain which children they benefit;
the information is available on its website kars4kids.org . According to Kirwan, this is an innovative way to do charity while also supporting donors.
“A lot of people wouldn’t be donating to charity if it wasn’t with their car.”
People just looking to get rid of a car and not thinking of claiming the tax deduction might think that it doesn’t matter what happens to the vehicle and who benefits.
Kalivas, however, suggests that charities would be much better off if people sold their cars themselves and donated the proceeds , or simply called charities they know to find out if they have car donation programs.
If your car is valuable and you plan to take a deduction for it, you should be cautious.
WARNING: If your car is valuable and you plan to take a deduction for it, you should be cautious. People who donate cars may unknowingly be drawing the attention of Internal Revenue Service auditors.
How to donate a car: important points to consider
If you want to get rid of a car and at the same time help someone in need, you must know how to donate a car while maximizing the benefits for charity and minimizing the risks.
Below you will find the 7 most important points to keep in mind when donating a car:
1. Research the charity you plan to donate your car to
If it does not have 501(c)(3) nonprofit status with the IRS, it is not a charity and your donation is not tax deductible.
2. Choose recognized charities to make your donation
There are several organizations, such as CharityWatch, that evaluate charities and rate them on their efficiency in supporting their causes.
3. Itemize your deductions
To benefit from a tax deduction for a car donation, you must itemize the deductions on your return . Remember that there are specific rules about the amount you can claim.
Taxpayers can deduct the full market value of a donated car in three circumstances: the car is used by the charity in its operations; make improvements to the vehicle to sell or use it;
or the charity donates or sells it to a needy person for below market value. Otherwise, you can only deduct what the charity receives as income from the sale of the car.
4. Get a receipt for your vehicle
Make sure you get a receipt from the charity for the vehicle and eventually a document that certifies how much it sold for. Charities must provide that document within 30 days of the car being sold.
5. Fill out IRS Form 8283
If the sale price or market value of the car is more than $500, you must complete Section A of IRS Form 8283 and file it with your tax return.
Check the Kelley Blue Book, Hearst Black Book or the National Auto Dealers Association for market values.
If the car is worth more than $5,000, you must get an independent appraisal and also complete Section B of Form 8283.
6. Take the car yourself to the charity
If the car is roadworthy, drive it yourself to the charity of your choice. This way you can save money and guarantee that the car will not be delivered to any intermediary for profit.
Remember to deliver the title of the car to the organization and have it also signed by a representative. If someone is going to pick up the car, have them sign the title and make a photocopy of it.
Many times there have been problems related to donated cars that were not properly transferred to the new owner.
7. Make a photographic record and keep receipts
Take pictures of the car and keep receipts for work and repairs done on it , especially if you want to claim a deduction for it.