4 things to know before you donate a car

Young man who wants to donate car looking at his gar in the garageImage: Young man who wants to donate car looking at his gar in the garage

In a Nutshell

Donating a car is easy and a great way to help charities. But unless you itemize your taxes, you won’t see any financial benefit come tax time.

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Do you have an old vehicle sitting around that you’re no longer using?

If so, one option to get it off your hands is to donate it to a charity. Depending on what the charity needs and the kind of vehicle you have, the charity itself may use the vehicle, sell it to a needy individual for a reduced price, auction it off for money or sell it to a salvage yard. In some cases, your vehicle doesn’t even need to be in running condition for you to be able to donate it.

Many charities make it very easy for you to donate your car in just a few steps. Many charities will even pick up your car for free. But if you also want to claim a deduction on your taxes and get a little bit back yourself, the rules are a bit hazier.

Read on for more about how to donate your car and how to take a tax deduction if you’re eligible.



How to donate your car

The easiest way to donate your car is to simply contact a charity and arrange for it to come pick up your vehicle. Many of the larger charities like Habitat for Humanity, Goodwill and the Salvation Army offer dedicated services for this, complete with phone hotlines and websites with donation forms. There are even dedicated car donation services like Charitable Adult Rides & Services, which handles all of the details and lets you choose the charity you’d like the proceeds to go to.

If you’re up for a bit more work, another option is to simply sell the car yourself and donate the money. In some cases this can be more beneficial to the charity, since you may be able to sell it yourself for more than the charity could get at auction for it. At the end of the day, it’s your choice.

Steps to stay safe when donating your car

Donating your car to a charity is generally safe. Still, you’ll want to take a few steps to help protect yourself and not be held liable for anything that happens with your car after you give it away.

  • Be wary of organizations that sound too good to be true — for example, if they promise that you can deduct however much you want from your taxes.
  • Get a receipt from the charity.
  • Remove your car’s license plates once you’re done driving it.
  • File a transfer form to sign over your title with your state’s transportation or motor vehicle agency.

Tax deductions: What to know before you donate your car 

One of the biggest benefits of donating your car is that you might be able to get a pretty sweet tax deduction. But just like anything else the IRS controls, it’s not as simple as handing the car over to a charity and then deducting its value from your taxable income. Instead, you’ll need to meet certain criteria in order to deduct the donation from your taxes. You can get more info from the IRS’ guide to vehicle donation.

You’ll need to itemize your deductions

You can claim a charitable deduction (including for cars) only if you itemize your taxes. And unfortunately, with the new tax law changes, most people are better off claiming the standard deduction, so your car donation might not benefit you at all come tax time.

You’ll need to donate to a charity that qualifies

In order for your donation to count as a tax deduction, you’ll need to hand your car over to a registered 501(c)(3) organization or tax-exempt religious institution. You can verify the charity’s eligibility by calling the IRS hotline at 1-877-829-5500 or by visiting the IRS website.

You’ll need to collect certain documents

After you hand off your car to the charity, you should get a written receipt right away. Depending on what the charity does with your car, you’ll also get either a written acknowledgement or a Form 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes) at some point. Keep a hold of this document, as you may need the information to file your taxes, and you may even need to send the document itself in if you’re deducting more than $500 from your taxes.

In addition, if you’re donating a car worth more than $5,000 and the charity doesn’t plan to sell it for cash, you’ll need to get an official written appraisal at least 60 days before you donate the car as well.

Filing the proper tax forms

Most charities sell the cars that are donated to them for money. In that case, you can deduct the car’s final selling price, which the charity will provide to you with written acknowledgement or Form 1098-C.

You’ll need to file the following documents with your tax return, depending on how much you can deduct:

  • $500 or less: Nothing in particular, but hang on to your records in case you’re audited.
  • $501 to $5,000: File Form 1098-C or the written acknowledgement, plus Section A of Form 8283.
  • More than $5,000: File Form 1098-C or the written acknowledgement, plus Section B of Form 8283 and the written appraisal of the vehicle if the charity isn’t selling it.

Bottom line

Whether you can qualify for a tax deduction from a car donation or not, you can rest assured that charities will be grateful for it. Even your old junker may qualify as a donation since charities can sell it to a scrap yard. So consider donating your car — it’s a great way to clear your yard while helping people out at the same time. It’s a win-win scenario — just make sure to cross all the t’s and dot all the i’s if you do plan on taking a deduction.


About the author: Lindsay VanSomeren is a freelance writer living in Kirkland, Washington. She has been a professional dogsled racer, a wildlife researcher, and a participant in the National Spelling Bee.… Read more.