Donating a vehicle to a charity is a very noble act, and it can also work in your favor when tax season rolls around. However, there are a few key guidelines to follow in order to ensure that your sizable donations makes it to the right place, and that you are not left owing money on something you are giving away to a good cause.
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Finding The Right Charity
Some charities – either due to size or internal structure – are unable to accept car or boat donations. A quick search online will give you a list of charities in your area that will gladly accept such a gracious donation. Among the list of the initial charity search results, it is wise to see which ones are in good standing with the Better Business Bureau (BBB) so that you know you are truly donating to a good cause, and that your vehicle will be put to good use. In addition to the BBB, you can use sites like Charity Tracker and Givewell to get more in-depth reports on how these charities rank, what they do, and how donations are used.
If you plan on using your car or boat donation as a tax deductible, then the charity you are giving it to must be an IRS-approved operation, falling under the IRS 501(c)(3) nonprofit organization form. Most religious establishments (churches, mosques, temples, synagogues, etc.) fall under this heading, as to many others, such as nonprofit artistic, educational, scientific, and even amateur sports organizations. The online IRS Publication 78 will give you a full list of qualifying organizations who will take your donation of a car or boat so that you can claim it as a tax deductible.
The Value of Your Donation
When you donate a car or boat to a charity, the first thing you need to do is get an accurate price for the make, model, year, and condition of your vehicle. There are numerous online resources – like Kelley Blue Book – to get an accurate estimate of your vehicle’s worth. Keep in mind that the IRS is going to want paperwork for anything valued at more than $500, so you need to keep a record of your vehicle, its value, and (if the charity sells the vehicle for money) a receipt from the charity itself showing the final sale value, in order to claim your donation as a tax deductible.
Delivery and Donation
When claiming a potentially high value tax deductible such as a car or boat that you have donated to a charity, you want to ensure that you have eliminated any possible risks and variables. Make sure that you transfer the title and ownership of the car or boat to the charity of your choice, and notify the Department of Motor Vehicles of the transfer. This will prevent any traffic violations that occur down the road from coming back to haunt you. You will also want to deliver the vehicle to the charity. This will eliminate the risk of accidents or tickets that may occur during the deliver process.
Donating a car or boat to a charity or nonprofit organization is a very generous act, but to ensure that everything goes smoothly, and that you can successfully claim your donation as a tax deductible, you should take as many precautions as necessary, pay attention to the details, and keep thorough records of every step in the process.