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How to Donate a Used Car to Charity

Most of us trade in our old vehicles when we buy a new car. But if an extra car, motorcycle, boat, or RV is gathering dust in your driveway — or no longer runs — donating your vehicle to a charity lets you skip the hassle of selling it on your own. Plus, charities will haul it off for free, and you get the financial benefit of taking the charitable contribution deduction.

Most charities make it easy to donate in just a few simple steps. But if you want to maximize your tax deduction, things get more complicated.

It’s crucial to follow these steps to ensure the charity gets the most value from your donation and you’re able to claim the deduction and avoid any trouble with the IRS.

How to Donate a Used Car

Donating motor vehicles to a charity doesn’t have to be complicated. But there are occasions when you want to follow every detail to the letter, especially if your contribution is valued at over $500. Ensure the donation process goes smoothly by following the proper steps.

1. Clean the Vehicle

Thoroughly clean the interior and exterior of your vehicle. Search the glove compartment and under all the seats for any scraps of paper, receipts, or anything with identifying information on it, including the registration and warranty or service contract information. If you have a service contract that’s still operative, cancel it.

Once you’ve driven it for the last time, remove the vehicle’s license plates. Also remove any cellphone equipment, navigation devices that weren’t factory-installed, and your garage door opener.

2. Contact a Charity

An Internet search provides plenty of national and local charities that accept vehicle donations.

Alternatively, if you already have a charity in mind, call and ask if it has a car donation program.

Aside from a few highly reputable exceptions like Donate a Car, avoid third-party auction houses that claim to resell your vehicle on behalf of a charity and donate the proceeds. It’s a best practice to donate to charities directly.

Unfortunately, scammers abound in the car donation industry. They can take the form of an intermediary company that offers to arrange the donation and sale for you and donate the proceeds.

But they typically take a significant cut in the form of commissions and fees, and those fees impact the amount you can write off as a charitable contribution since you can only deduct the actual proceeds the charity receives. Plus, it means very little ends up in the hands of the charity.

To maximize your contribution wherever you decide to donate, make sure the charity you choose is:

  • Reputable. Check with the Better Business Bureau to make sure the charity you’re considering is highly rated.
  • Efficient. Charities use your donations in several ways. Most resell cars at auction or to a salvage yard for scrap metal and use the proceeds to fund programs. A few give donated vehicles directly to those in need or use them to drive program participants to appointments. Regardless, ensure the charity uses your donation to maximum efficiency by searching its rating with an organization like CharityWatch.
  • Registered as a Nonprofit. If it doesn’t have 501(c)(3) nonprofit organization status with the IRS, it is not a charity. And that means your donation won’t be tax-deductible. Use the tax-exempt organization search tool on the IRS website to find the charity you’re considering.

3. Complete a Questionnaire

Most vehicle donation charities provide a questionnaire that asks donors for personal information, a description of the vehicle’s condition and location, and verification of the title.

Note that many of the larger charities, such as Habitat for Humanity, Make A Wish Foundation, the National Kidney Foundation, Goodwill, and the Salvation Army, have dedicated vehicle donation departments. Those departments often have their own websites, which typically have an FAQ (frequently asked questions) page and customer support.

Additionally, if you have any questions about what’s involved in the process, how to get a copy of your title if it’s missing, or how to claim the donation on your taxes, most charities have customer support teams ready to answer your questions.

4. Schedule an Appointment

Once you’re ready to donate, the next step is to make an appointment to deliver the car or have a representative from the charity come pick it up.

All reputable car donation charities pick up your vehicle for free. There should be absolutely no upfront charges for your donation — no towing, title, or paperwork fees of any kind. If the charity requests a fee for pickup, that’s a red flag it’s a scam.

But if your car is still drivable, drop it off yourself. The charity deducts the cost of the tow from the ultimate sale price of your donated car, which means less money toward the charity and less money you can write off your taxes.

5. Transfer the Title

When you make a car donation, you must sign your title directly over to the charity to make it the new owner. All states have clear regulations about the transfer of ownership of vehicles, and they vary from state to state. So it’s essential to check the laws governing title transfers where you live. Just search “[state name] title transfer.”

But in general, to transfer your vehicle title, follow these steps:

  • Ensure the Title Is Clear. Ensure there are no liens placed against the vehicle, as the DMV will not transfer ownership if there are. The most common lienholders are banks that provide financing for vehicle purchases. The lender releases this type of lien when you fully pay off the loan. Other types of liens include mechanic’s and garage keeper’s liens, which businesses place against vehicle titles for unpaid repairs or storage fees.
  • Complete the Owner Section. To release a clean title, the donor first completes the section related to the owner or seller. In most states, you can find that on the back of the title. All those listed as owners must sign. You must sign your name exactly as it’s written on the title. And most states specify signatures must be in only blue or black ink. Additionally, some states require notarized signatures to transfer vehicle titles. If that applies to your state, don’t sign the document until you’re in the presence of a notary.
  • Complete the Transferee Section. Most states require that charities be identified by name as the transferee on titles for vehicle donations. Some states only require the signature of a charity representative, while others require the notarized signature of an authorized officer of the charity.
  • Make Copies. After you’ve completed the donor and charity sections, someone must submit the title and any state-specific documentation to the department of motor vehicles or equivalent office in that state. Charities generally do that part. To keep yourself legally covered, make copies of the front and back of your signed title.

Caution: A charity may ask you to leave the transferee section blank to avoid having to retitle the vehicle. If it does, find another charity. If you leave this section blank, you remain liable for the vehicle. When the charity sells it at auction, if the new owner fails to register it, it’s still yours in the eyes of the law. You will be held responsible for any incurred parking tickets or if it’s used in a crime.

6. Save Your Receipts

Immediately after you drop off your vehicle or a representative picks it up, ask for a temporary receipt of donation. The representative should have boilerplate receipts or acknowledgment of donation forms they can fill out with the relevant information. Then ensure an official receipt will be on its way in the mail within a reasonable time frame.

Once you’ve donated the vehicle, the charity begins using it, selling it for scrap metal, or sending it to auction. If the charity uses the car or sells it at a discount to a needy individual, you need the original proof of donation receipt to deduct the car’s fair market value.

Consult the Kelley Blue Book for fair market values. Note that you cannot automatically claim the highest listed value for your vehicle’s make, model, and year. You must be honest about its condition and the value of the car.

If the charity sells the vehicle at auction, you will get a second receipt disclosing its sale price. Charities are legally required to provide this tax receipt within 30 days of selling the car. The IRS allows you to deduct the vehicle’s sale price during the year you receive the tax receipt.

Note that a charity has up to three years to sell your car. So, if the charity plans to sell rather than use it, you must wait for the sale before deducting the charitable donation from your taxes.

Additionally, whether the charity sells or uses it, if the value of your vehicle is more than $500, the IRS requires the charity to report the donation by completing a form 1098-C or written acknowledgment, which must include:

  • The name, address, phone number, and taxpayer identification number for the recipient charity
  • Your name, address, and taxpayer identification number
  • The date of the donation
  • The mileage, make, and model of the vehicle
  • The vehicle identification number for a car or truck, hull ID for a boat, or aircraft ID for an airplane
  • The amount of the donation or proceeds of the sale
  • Whether any material improvements were made to the vehicle
  • Whether material goods or services were exchanged for the vehicle and their value (if any)

Form 1098-C includes three copies: A, B, and C. The charity files Copy A with the IRS and sends you Copies B and C. You then file Copy B with your tax return if you want to claim a deduction of more than $500 and keep Copy C for your records.

Noncash donations are the most common triggers for IRS audits, so be careful to cover all your bases. Specifically, the IRS warns that without the 1098-C or written acknowledgment, your deduction can’t exceed $500.

For more specific guidelines, see IRS publication 4303, a Donor’s Guide to Vehicle Donation.

7. Take a Tax Deduction

To take a tax deduction for your vehicle donation, you have to itemize deductions on your return. But to benefit from itemizing, all your deductions for the year must exceed the amount allowable for the standard deduction — because you can’t do both. Thus, most people are better off claiming the standard deduction. To find out which is suitable for you, see our article on standard versus itemized deductions.

According to the IRS, for the tax year 2021, the standard deductions are:

If you do itemize, the IRS has detailed rules about how much you can claim and which forms you need to fill out.

Taxpayers can deduct the fair market value of the donated vehicle under the following circumstances:

  • The charity uses the vehicle in its operations.
  • The charity materially improves the vehicle to sell it.
  • The charity donates or sells it below market value to an individual in need.

But a donated vehicle rarely meets one of these criteria. Unless your vehicle is in excellent condition, the charity will most likely sell it at auction or to an auto salvage yard.

Plus, even if your vehicle meets one of these criteria, you’re still limited to deducting only the lesser amount of either the charity’s proceeds or fair market value.

And if your donated vehicle doesn’t meet one of these criteria, you can only deduct the proceeds the charity receives from selling the car. Note that isn’t the actual sale price of the vehicle — only the profit after deducting any expenses and fees. Also, you may not receive this information in the tax year you donate the vehicle because a charity has up to three years to sell your car.

To claim the deduction on your tax return, start by filling out a Schedule A. Follow the instructions on the IRS website. Additionally, you may need to complete additional forms, depending on the amount of your deduction:

  • Less Than $500. You don’t need to fill out any additional forms, but hang onto any proof of donation or proof of sale receipts you received from the charity.
  • Between $501 and $5,000. Complete section A of IRS form 8283 and file it along with your 1098-C and your return.
  • Over $5,000. Complete section A and section B of form 8283. If the charity doesn’t plan to sell the vehicle, you need to get an official written independent appraisal within no more than 60 days before donating the car. File it along with your 1098-C, Form 8283, and return.

Final Word

Whether or not you qualify for a tax deduction from your vehicle donation, there are still benefits to donating it to charity. If your used car is no longer drivable or you aren’t looking to buy a new one, it’s a convenient way to clear your yard or driveway while helping needy individuals.

If you’re up for more work, another option is to sell the car yourself and donate the money. In many cases, you can get more for the vehicle in a private sale than the charity could fetch at auction. You can then take the proceeds and donate the cash. It’s one way to maximize your tax benefits.

Or you can seed a savings fund for a future new car instead and stash your proceeds in a high-yield savings account.

Sarah Graves
Sarah Graves, Ph.D. is a freelance writer specializing in personal finance, parenting, education, and creative entrepreneurship. She's also a college instructor of English and humanities. When not busy writing or teaching her students the proper use of a semicolon, you can find her hanging out with her awesome husband and adorable son watching way too many superhero movies.

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