Four Tips About Donating Your Car To Charity

Four tips from the IRS about donating your car to charity:

1. Investigate the Charity

Before you donate your car, boat or automobile to a charity, you must do a little research about it. Seems obvious, but it's easy to trust when you shouldn't.

The charity must be a qualified nonprofit in order for it to be deductable. If you are hoping to deduct the value of your vehicle donation from your federal taxes, you need to make sure that the organization taking the car is indeed qualified before you give them the title. One way to check to see if a Charity is qualified is to look at its incorporation report, which should be made public. Make sure that it is a registered 501(c)(3) public charity, and if so, you should be good to go. There are other types of charities, like 501(c)(4) or 501(c)(6) that may be qualified, but you should ask them directly before you donate.

2. See if you are eligible to even get the credit

This may not matter to you as much. If you are more interested in the donation part, and less in the tax benefit, then you can skip this investigation. However, if part of the reason for your generosity is to get some reward, make sure you are eligible.

In order to deduct your charitable contribution, you must itemize your own deductions on Schedule A of your Federal Tax form 1040. If you do not itemize, and only use the standard deduction, then you are out of luck from a tax standpoint. There may also be a cap to the total amount you can deduct. Most people know if they itemize, but check to see you aren't near the cap before you try to claim your deduction.

3. Check how valuable your car is

Your car is probably worth a different amount than you think. It may be worth more -- any car that runs is worth more than you'd be willing to pay for it, in my experience -- or it may be worth less, depending on mileage or condition.

You get to deduct the car's fair market value (FMV) which may be different from its Kelley Blue Book value. If your car is damaged, or doesn't run well, or has something otherwise wrong with it, it may be worth something below what the KBB says it is. You are only allowed to deduct the FMV of the vehicle.

4. Treat it as a charitible donation

You are undertaking a real financial transaction, treat it as such.

Make sure you get a receipt for your donation, the charity should supply this. Demand one before you turn over the title to the car. If your car is over $5,000, you may need to get a written appraisal or assessment for it, in order to fully claim the credit.

Donating your car to charity can be a great tax benefit. But be sure to follow all the steps before doing so!