7 Tips for Donating a Car to Charity for a US Tax Deduction

Perhaps you have tried to trade in your used vehicle with an automotive dealer, only to find the trade-in offer quite disappointing. Maybe you have attempted to sell your used car in the open market, using classified advertisements, but a line of prospective buyers fails to form in front of your house.

Why not donate your used vehicle to a charity?

If you live in the United States, you may receive a significant tax benefit for giving your previously driven car to a reputable charity. The same advantage applies to airplanes, antique automobiles, boats, campers, motorcycles, recreational vehicles, snowmobiles, tractors, trucks, vans and other vehicles.

Many non-profit charitable groups are pleased to receive such in-kind gifts, either fixing up the donated vehicles for continued use or selling them (usually at auction) to raise additional funds.

Some charities will even accept junkers as vehicle donations, hauling away now-useless vehicles to market their useful scrap metal or components.

What are the secrets to successful car donation?

Donating a used vehicle may sound like a simple prospect, but potential pitfalls may exist in the process. Follow these seven tips for minimum risk and maximum potential benefit, if you are considering making a charitable gift of your previously owned vehicle.

Choose a charity that interests you for your car donation.

Charities of all stripes enthusiastically receive car donations. From Goodwill Industries to the American Cancer Society, and from Habitat for Humanity to the Purple Heart Car Donation program for U.S. military veterans, such programs abound.

What charitable causes are most important to you? You could donate your used car to benefit animal rescue, environmental preservation, humanitarian aid, religious outreach or another purpose.

Check clearinghouses and listings for suggestions of charities accepting donated cars or other vehicles.

Here are several charitable organizations (in addition to those cited above) that currently advertise acceptance of car donations (CTRL-click on each name to view that outfit's website in a new internet window.). These car donation sources are listed alphabetically:

1-800-CharityCars,CarAngel, Cars Helping America, Cars4Causes, DonateCarUSA, DonationLine,Kars4Kids and OnlineCarDonation.

Inclusion of potential car donation charities here is not to be construed as an endorsement of any or all of these organizations.

Vehicle donors should carefully investigate any charitable organization before making such a significant gift. In addition, those giving cars or other vehicles as charitable gifts must deal directly with recipient organizations for maximum tax benefits and gift impact.

Calculate and document the fair market value of your used car before donating.

The U.S. Internal Revenue Service (IRS) has specific online instructions for figuring out the acceptable current worth of a vehicle for donation. Kelly's Blue Book is another helpful resource for figuring the up-to-date value of a used car or truck.

In the U.S., a vehicle donation worth less than $500 currently may be listed as a tax-deductible gift on a tax returns, using the donor's own estimates of the car or truck's value. Anything larger requires considerably more documentation.

Since 2005, a car donor offering a pricier vehicle must obtain a written receipt from the recipient, including a stated value for the gift. This value is to be determined by the vehicle recipient's proceeds from the car or truck's sale. Of course, this means a car donation tax benefit may be delayed until such a sale occurs.

Plan for pickup of your used car.

The largest and most established charitable organizations, such as the Salvation Army Car Donation Program, are often willing to pick up car donations for free at donors' own locations.

Donate your used car before the end of the calendar year.

A tax-deductible car donations must take place before December 31^st, if the value of the gift is to be applied against the current year's taxes.

Keep careful records of your car donation for tax purposes.

The IRS requires specific documentation of used car donations. Vehicle donors must present acknowledgement (in writing) from the recipients of the gifts. What's more, car donors have to file itemized tax returns to claim vehicle donation credit.

Do a little homework before donating your car or truck to charity.

A simple internet search reveals pages and pages of organizations that issue pleas for used car donations. How can you tell which are legitimate?

Smart vehicle donors often inquire with the Attorney General's office, Better Business Bureau, United Way or other philanthropic clearinghouse to evaluate potential vehicle gift recipients.

In addition, such a charity must be qualified as an IRS-registered 501(c)(3) non-profit organization, rather than a charitable clearinghouse or fund-raising outfit. The IRS offers an online search of certified tax-exempt organizations for qualified used vehicle donations.

Follow these seven simple steps to streamline the process and gain the optimum tax benefit reward when donating your used car, truck or other vehicle.