Donating a car to charity can be a great way to give to charitable causes. It also can be a way to take a nice tax deduction. If you do plan to deduct the auto, boat or other vehicle donation on your taxes, you'll need to check that the charity, educational organization or religious organization is a qualified one in order to make the donation eligible for the write-off.

Last Updated: October 17, 2009

Qualified charities are those charitable organizations listed as section 501(c)(3). Refer to IRS Publication 78, Cumulative List of Organizations, for a list of some qualified charities.

Qualified religious organizations are generally not included in that list, however. So if you want to donate to a church, synagogue, mosque or other religious entity, you should check out the Eligible Donees Not Listed in Publication 78 page, or contact the IRS if you do not know that the entity qualifies. For more information, see Resources and Helpful Links.

When you compare the charity you're considering with the charities on the list, have at hand the exact spelling and name of the charity as well as the location of the headquarters. A sound-alike charity name that's not exactly the same is a heads-up that it may be a scam charity.

Qualified charities that sell the car for salvage or to buyers and then use the money for charitable purposes are the most common. The amount you get to deduct for these charities may be lower than the car's fair market value, because it will be no greater than the amount for which the charity sold the donated vehicle.

Even more ideal for tax purposes are qualified charities that

• use the donated car in regular operations
• give the car to a disadvantaged person
• sell the car to a disadvantaged person at substantially lower rates than the fair market value, or
• significantly improve the car's material state

You can often deduct a greater amount--that is, the amount of the fair market value--if the car is used for charitable purposes.

Most charities arrange with large car donation centers to handle the collection and sales of automobile donations. The vehicle donation programs usually keep a percentage of the proceeds from the sale when the charity decides to sell the cars that it receives, which is usually what happens.

Some of the major charities that accept auto, truck, boat, or RV donations include:

• Red Cross
• Purple Heart
• American Diabetes Association
• Habitat for Humanity
• Volunteers of America
• Kidney Foundation
• Goodwill
• Catholic Charities USA
• American Heart Association Car Donation
  

There are many smaller charities that also accept car donations. Smaller charities can be a good way to contribute to causes that often get less attention. Look in your local area or contact your favorite small charity for information on auto donation programs.

You may hear warnings about scams and frauds with car donations. One of the complaints is that the money doesn't always go 100% to the charity, but rather to the third-party contractor that manages the vehicle donation program.

According to the Point Reyes National Seashore Association, the charities do benefit from not having to organize the collection, distribution, and resale of the donated vehicles, even given the cost of the auto donation management service. From its vehicle contributions, the Point Reyes Association has raised over $300,000 for its cause and considers its vehicle donation program, which covers 2.5 percent of its operating expenses, to be effective and efficient.

Some car donation centers allow charities to choose options whereby they get a greater percentage of the proceeds from the sale of the donated cars if they provide some of the administrative resources. Many charities opt to do this, while others allow the larger car donation programs to organize the contributions completely. The Point Reyes Association uses a combo--it contracts with two different car donation programs, one for higher end vehicles and the other for "junk" cars.

Go to How to Donate Your Car to Charity and Get a Tax Write-Off.