Donating Cars And Motorcycles

By Kristen Castillo

April 22, 2016 5 min read

If your car is barely running or isn't drivable, you can donate it to a variety of charities. Charities benefit by selling vehicles or their parts to fund their nonprofit efforts. But donating a vehicle benefits the owners, as well.

By donating, you can get rid of the unwanted vehicle and can get a sizeable tax write-off depending on your vehicle's value. In 2000, an estimated 733,000 people donated a vehicle and claimed the deduction on their federal tax return. These donations were valued at about $2.5 billion, resulting in a reduced taxpayer liability of $654 million.

While this is an excellent opportunity, one must research carefully beforehand, as donating a vehicle for tax savings isn't always what it seems. When the General Accounting Office researched donations, they found one instance where a donated 1983 truck was valued at $2,400, but the charity sold it at an auction and only received $31.50 after administrative and advertising costs were deducted.

Art Taylor, president and CEO of the Better Business Bureau Wise Giving Alliance, recommends taking a few precautions when donating a vehicle: "Donors should make sure they're doing two main things: taking the proper steps for tax deductibility and (checking) to make sure (they're) getting the most mileage out of (their) donation by researching the charity ahead of donating."

Taylor recommends donors make sure they correctly identify the charity they're looking for. "It seems simple, but with so many charities out there, mistaken identity is a common problem," he says, explaining that "thousands of charities have the word 'cancer' in their name but have no connection with one another."

Chances are that donating your vehicle is about more than a tax benefit. You want to ensure your contribution can help the charity do its work.

"It is important to do your due diligence to make sure you are donating your car to a charity that is financially efficient, ethical and effective," says Sandra Miniutti, vice president of marketing and CFO of Charity Navigator, the largest independent charity evaluator in the United States. "Moreover, you want to ensure that the charity's work matches your philanthropic interests."

If you're passionate about the environment, consider donating to a green charity. Do you care about kids and learning? Find a charity that benefits youths and education. Want to help veterans? Donate to a charity that supports troops and vets. Both BBB and Charity Navigator are great sources for finding the ideal charity because they don't endorse specific charities for donations.

"The best charities for car or motorcycle donations are those donors can trust without hesitation," says Taylor, noting the BBB has a list of accredited and "worry-free" charities that meet certain standards and expectations, such as disclosure (revealing finance, governance, fundraising and marketing practices).

It's better to work with a charity if possible, not with a for-profit third party, which facilitates donations but often at a pricey cost. Now, how can you determine if a charity is worthy of your vehicle donation? First things first: Make sure you're donating the car, truck or motorcycle to a 501(c)(3) nonprofit so your donation is tax-deductible.

When you have a charity in mind, speak to someone who works there and ask how much money from a vehicle donation will actually go to the charity. It may receive a fixed amount or a percentage of the sale.

It's also smart to check the IRS guidelines to know how to properly document your donation for tax purposes. If your car's worth brings your total noncash tax deductions to less than $500, obtain written acknowledgement of the donation from the charity and keep it in your records. For total noncash deductions over $500, you need to fill out the IRS form 8283. Deductions over $5,000 require a written professional appraisal, too. Keep photos of the vehicle and detailed records of the donation.

Calculate your car's worth at Fair Market Value. Otherwise, you can only deduct the amount the charity sells your car for at auction, which is usually written on the receipt the charity sends you after the vehicle is sold.

And one last but very important thing: Don't forget to transfer the vehicle's title after the donation is made. Keep a copy of the transfer just in case there's an issue with a parking ticket or accident before the vehicle is sold by the charity.

Now that you have some guidelines and suggestions, you're ready to make an educated donation. You'll save on taxes and contribute to a good cause, too. It's a win-win.

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