They say that one man's junk is another man's treasure. This mantra applies to so many things in life, and it's very easy to put to good use -- perhaps this could be referring to the car sitting in your driveway and collecting cobwebs. Whether you'd like to benefit your favorite charity or you're looking to get a tax deduction -- or maybe both -- you'll have to follow some rules in order to successfully donate your car. Here's a primer to get you started.
*What Are You Trying to Do?
To just get rid of a vehicle, running or not, all you have to do is find a charity that accepts vehicle donations, complete the necessary transfer paperwork, and you're done. At Habitat for Humanity's Cars for Homes web site, for example, simply fill out your vehicle and contact information so they can schedule pickup.
If the car is still drivable, your donation will help any charity more if you drop off the vehicle yourself.
Obtaining a tax deduction on your itemized tax return is more involved. You'll be required to correctly value the vehicle. Be sure the charity qualifies under the Internal Revenue Service rules for deductible donations. Certain religious organizations and 501(c)(3) organizations qualify. Make sure your total charitable donations are within IRS limits, and obtain a receipt for the donation, even if that means filing an extension on your tax return.
Remember that this will be a deduction to your income, so it's based on your tax bracket. For example, a car accurately valued at $1,000 on income taxed in the 28 percent bracket will net a $280 deduction. IRS Publication 4303, "A Donor's Guide to Vehicle Donation," provides excellent information about qualifying donations, proper documentation and more in an easy-to-read format.
*Value Your Vehicle
The maximum tax deduction for a donated vehicle is the fair market value for the year, make, model and condition. It may be less based on how the charity will use the vehicle, such as: for the recycled materials, sale, its own use, or to give away. If the purpose is a sale, for example, your tax deduction will only be the amount of the charity's proceeds. So, if Edmunds.com values your vehicle at $1,000, but the charity sells it for $500, your receipt from the charity will say $500, and that will be the amount of your deduction.
*Do the Paperwork
Whether you simply wave goodbye as a charity driver tows away your car, or you follow the necessary steps and get the required receipt for tax purposes, be sure to transfer the title to the charity. This will avoid incurring any parking fines or other usage or storage issues with the vehicle. Also remember to cancel your registration and insurance, and remove the license plates. Then you're free and clear.
Ultimately, there is endless information out there. To do the most good with your vehicle donation, select a qualifying organization whose work you respect, that responsibly manages its funds and will provide the documentation you need when you need it. Go online and simply search "donate my car to charity," and you'll get a list of sites that may want your vehicle, organizations that evaluate charities based on performance criteria, sites with donation guidelines, and a handy overview by TurboTax.