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How to Donate a Used Car to Charity

By David Bakke

car donationThe process of purchasing a new vehicle can be overwhelming. Nobody looks forward to dealing with overbearing car salesmen or the cumbersome process of trading in or reselling a car. However, you do have another option that may make the experience simpler and more satisfying: Instead of trading in or selling your used car, consider donating it to charity.

Used cars help people in need in a variety of ways. For example, some organizations use donated vehicles to transport people in need to appointments or to run errands. Additionally, many charities sell donated cars at auctions and use the proceeds to help fund operations.

You may believe that there is no financial upside to donating a car, especially when compared to selling it. However, such a donation can be used to receive a tax deduction. Furthermore, if you’ve got an old clunker that doesn’t have much monetary worth, you can still donate it, as many charities will tow your car at no cost to you. Many charities work with mechanics to repair previously inoperable cars, while other organizations sell them for scrap metal. Of course, many nonprofits do not accept totaled vehicles, though it may still be worth inquiring.

Donating a Car to Charity

You can complete the donation process by following several easy steps:

  1. Clean the Car. Be sure to remove all personal belongings, and thoroughly clean both the interior and exterior.
  2. Contact a Charity. An Internet search should provide you with plenty of local charities that accept automobiles. Additionally, many Goodwill centers accept vehicle donations.
  3. Complete a Questionnaire. Charities often provide a questionnaire that asks donors for personal information, a description of the vehicle’s condition and location, and verification of the title.
  4. Schedule an Appointment. Set a time to deliver the car or have it towed.

Once you have donated the vehicle, the nonprofit either begins using it, sends it to auction, or sells it for scrap metal. If the car is sold, you will receive a receipt in the mail for the sale price within 30 days. You can take the tax deduction during the year you receive the receipt.

car donation

Important Considerations

Before, during, and after the donation process, there are a number of important things you must consider to ensure that the car ends up in good hands – and that you receive the optimal write-off amount:

  • Find a Reputable Charity. Research the charity thoroughly to ensure that they have IRS approval for tax-deductible donations. Otherwise, you will not be able to write off any amount for the donation.
  • Donate Directly to the Charity. Many “middleman” companies offer to arrange the donation for you. Avoid these organizations, as they charge fees that impact the amount you can write off. Furthermore, you don’t need assistance, as this easy process takes very little time.
  • Transfer the Title for the Auto. Officially transfer the title for the car into the charity’s name. Transferring the title for the auto can help you avoid issues or problems after you donate the vehicle, and simply involves a trip to your local DMV office. The fees for transferring a title vary by state, but usually cost less than $30.
  • Collect Receipts. Make sure you receive a receipt that explicitly states that you have donated the car, and, if the car is sold at auction, get a second receipt disclosing the sale price. You need these receipts to deduct the donation from your taxes.
  • Take a Tax Deduction Based on Sale Price. If the charity sells your car at auction, the amount of your tax deduction is based on the sale price. However, if the charity gives the car to someone in need, you may be able to deduct the fair market value of the vehicle from your taxes. Contact a tax professional if you encounter any difficulties.

Final Word

The average American only keeps an auto for five years before buying a new car, and you can save a substantial amount of money by driving your car for a longer period of time. However, at some point, you will need a new car. Rather than going through the hassle of trading in your car or selling it yourself, consider donating your car to help others in need.

Have you ever donated an automobile? What was the process like?

David Bakke
David started his own personal finance blog, YourFinances101, in June of 2009 and published his first book on ways to save more and spend less called "Don't Be A Mule..." Since then he has been a regular contributor for Money Crashers. He lives just outside Atlanta, GA and most all of his free time is taken up by his amazing three year old son, Nicholas.

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