Thinking of donating a car to charity? There are a lot of things to consider before doing so. For instance, you need to make sure the organization is tax-exempt as a charity. The Better Business Bureau (BBB) offers information and guidance so you can feel confident when you donate a car to a charitable organization.
The BBB offers these 7 Tips on How to Donate A Car To Charity:
- Verify that the recipient organization is tax-exempt as a charity (Check with the IRS in the U.S. or the CRA in Canada) or ask the organization for a copy of its tax-exempt status determination letter. The BBB says that in the U.S., churches aren't required to apply for tax-exempt status and may not have such a letter or be included in the IRS site above. A car donation to a church, however, would still be deductible.
- You'll also want to check out the charity that’s soliciting or is advertised as the one your donation will benefit. Contact it directly or go to its website. The BBB warns that the names of well-known charities are sometimes used without permission, and the named groups may not benefit.
- Also see if the charity is registered with the government agency in your state that regulates charities (usually a division of the office of the state’s attorney general). Find the relevant office in your state.
- Understand deductibility details. The BBB explains most cars donated to charity are sold at auction, and the donor’s tax deduction is limited to the gross proceeds from the sale. The charity must provide that amount to the donor in writing. Donors can claim the car’s full fair market value only in certain conditions, such as when a charity uses a car in its program or gives it to needy individuals.
- Ask how much goes to the charity. Also be award that the amount a charity receives for an auctioned car varies according to its arrangement with the company hired to handle the collection and sale. The BBB advises it may be a percentage of the sale or a fixed amount per vehicle.
- Check IRS and CRA guidelines in the U.S., check A Donor’s Guide to Car Donations (Publication 4303) or call (800) 829-3676. If you are claiming a car donation of over $500, you will need to complete and attach IRS Form 8283 to your tax return. If the car is worth more than $5,000, you will need a written professional appraisal.
- Transfer the car’s title to the charity’s name and keep a copy of this record. The BBB says the title change will help you avoid potential problems if the car is somehow parked illegally by the organization or is involved in an accident or other mishap before the charity sells it.
- For more, read BBB Wise Giving Alliance's guidance on car donations.
Source: BBB.
Photo Credit: Andrey_Popov./Shutterstock.com.