When You Donate a Vehicle to Charity, Do It Right

You are upgrading your car and you want to donate your old one to charity; the huge tax deduction is, of course, a big plus. But before one donates a vehicle to a charitable organization there are some guidelines to follow or else the donation will be challenged by the Internal Revenue Service (IRS).

The first rule is to find the right charity organization you want to donate a vehicle to. Do your research properly and find out if the organization qualifies for tax deductible donations. Only then will your donation be eligible for tax deduction. You will find all the information on the IRS website - Publication 78. You will find other not-for-profit organizations listed here too.

You should avoid brokers and other middlemen who will promise to act as intermediaries. Don't fall for the high decibel advertising which promises all assistance to donate your car to charity. Just do the donation yourself. Many of these intermediaries retain more than 50 per cent of the sale value of the vehicle to themselves and the charity does not benefit fully from your largesse.

If you are pressed for time or for some other reason you wish to use a middleman to donate a vehicle to charity, don't forget to ask what the commission is. In many cases, the intermediary just pays the charity a flat fee of, say $100 or a monthly fee of about $2000. In this case, you may not get a tax deduction.
The valuation of the vehicle has to be authentic. The IRS is not going to take just your word on that. If the vehicle is valued at over $500 the sale receipts will have to be filed with the IRS. Make sure the charity gives you a receipt stating how much money was accrued from the sale of your car.

If the charity does not sell the vehicle then you need to get an acknowledgment from the charity stating the use of the vehicle. If the value of your donation is under $500 then you don't need a sales receipt. But recheck the market value from sources such as the Kelley Blue Book or the National Auto Dealers' Association guide.

Just making a donation is not enough. You will have to ensure that the vehicle is transferred to the charitable organization. After the vehicle has been re-titled, you will have to report this transfer to the DMV (Department of Motor Vehicles). If you don't do this you will answerable for parking fines and other traffic violations of whoever is driving this vehicle. Don't leave blanks on the donation papers.
You will need to keep the record straight at all times. If the donation is valued at more than $500, IRS Form 8283 becomes mandatory. Donations more than $5000 require an independent appraisal. Make sure you keep on file the receipt acknowledging the donation and a photocopy of the transfer document. This may prove to be a big pain, but when you donate a vehicle to charity, you ought to get the best tax deduction and the charitable organization, the proper benefit.