Donating a car to charity is a valuable service to helping you get rid of
your used car for a worthy cause. In the process you will receive a nice
tax deduction. It will save you time and issues over trying to sell your
car. Donating a car to a charity lets you deduct its fair market value
from your taxable income. (Please see below for new tax law on deductions)
Please note that your car does not even need to be running for you to
donate it. Most donation charities will tow your car free of charge!
- Find a charity that accepts cars without charging a removal fee.
Most reputable charities do not charge any type of fees.
- Make sure the charity is a registered 501(c)(3) charity or qualified
religious organization that can lawfully accept your donation and from
which you can get a tax deduction.
- Determine the fair market value of your car. This can be done by
using the Kelley Blue Book or IRS Publication 526 ("Charitable
Deductions") and 561 ("Determining the Value of Donated
Property"). See below under resources for pdf copies of the
- Get a tax receipt with the charity's name and federal tax ID number,
donor's name, date of donation, year of car, car make and model of the
- Notify the DMV and your insurance company that you no longer own the
vehicle. Follow state regulations on what to do with the title and
plates. Keep the receipt and completed IRS Form 8283 for tax time.
- Ensure no removal fees
- Find registered 501(c)(3) charity or qualified religious organization
- Determine fair market value of car
- Get tax receipt from charity
- Contact DMV / Insurance and get completed IRS Form 8283
Car donation tax laws (starting 2005)
To help reduce overvalued tax deductions on auto donations, the IRS has issued new guidelines. In addition, legislation signed into law by President Bush on October 22, 2004 makes substantial changes to used-car charitable deductions starting in 2005.
Beginning January 1, 2005, when a taxpayer donates a vehicle for which the
claimed value is $500 or more, the deduction he can claim will depend on how
the charity plans to use the vehicle. If the auto is sold by the
nonprofit organization, then the taxpayer will be able to deduct only the
amount of gross proceeds the organization received from the sale. And the
donor will have to depend on the charity to let him know the donation amount
by the individual tax-filing deadline.
If, however, the group plans to use the car for what the law deems as
"significant" tax-approved charitable work, the donor would be able
to claim the fair market value of the donated vehicle. The new law also
provides penalties for fraudulent acknowledgments provided to taxpayers.