According to comedian Jeff Foxworthy, you could be a redneck if you mow your lawn and find four old cars you forgot you owned. If that’s your situation, consider donating your old beater(s) to charity. Of course you have questions: which charity? What if my car doesn’t run, or what if I don’t have the title? What’s the best way to do it, and can I claim it on my taxes as a charitable contribution?
DONATING IS EASY
It’s quite easy to donate your car to charity. You may find a local charity or church who will accept your car, or you may want to surf the Internet to find a service that will handle the transaction for you. Either way, everyone wins: the charity benefits from your donation, and you, from the pleasant glow that comes from helping others. Plus, you may be able to claim the transaction as a tax deduction!
If you decide you want one of the many online services to handle the matter for you, there are many choices – over 4,000 charities accept donations of vehicles. Type “Donate car to charity” into your favorite search engine or follow the links below. Look for a service that will pick up or tow your car with no cost to you.
DONATE TO WHOM?
The Vehicle Donation Processing Center, Inc. offers a helpful list of charities accepting car donations. But you want to be a little cautious here – a number of those 4,000 charities will be scam artists. Make sure the one you choose is reputable and tax-qualified (non-profit) organization under IRS rules. If you have doubts, call the IRS at 1-800-829-1040 and ask. Or you can check through the IRS Web site’s directory to see if the charity is on the “approved” list, or you can consult the GuideStar’s registry, which lists more than 850,000 non-profit organizations.
Check to make sure that the charity you choose has a “501 (c) (3) public charity” non-profit status. Many organizations claim non-profit status, but donations to “501 (c) (4)” organizations are generally not tax-deductible. These are political organizations with lobbies, like the National Rifle Association and Disabled American Veterans.
IRS rules do not require these service agencies donate any set amount to the charities they represent; those amounts are the result of negotiations between the service agency and the charity – look for a low fee, and confirm with the agency before you donate. Some of these service agencies have been accused of “holding themselves out as charities and misleading the public on the amount that is actually reaching charitable causes.”
The way you transfer your car to your chosen charity is important. Examine the papers they give you carefully. If they ask you to leave this line blank or that line blank or any line blank, find another charity.
You must be sure to follow through with all the steps to ensure ownership transfers completely, or you may be liable for any damages caused or incurred by the car until the transfer is complete. The charities will probably not use the car, but will sell it quickly. If the transfer has not been completed, you may be liable for any tickets or damages charged against the vehicle.
HOW IT WORKS
When you are ready to sign your car over, the charity or donation service you have chosen will take the required information down, prepare the necessary documents, arrange for the pick up, the auction sale, and in the case of a donation service, arrange to distribute the funds to the charity. If you are donating locally, your recipient may take care of this for you.
ARE THERE TAX ADVANTAGES?
The IRS over the last few years has become understandably nervous about how owners value these cars donated to charity. (A report issued in November 2003 by the General Accounting Office notes that inflated vehicle valuations cost the U.S. Treasury $654 million in lost revenue in 2000).
Marcus Owens, director of the IRS division that oversees charitable contributions has stated that some car donation programs are suspicious, to say the least.
“There is an advertisement in a local paper in Washington,” (Owens said), “[stating] that you can obtain a full Blue Book deduction for an automobile [even if it] has no motor. There is another set of advertisements that suggest that, in addition to getting a deduction amounting to full Blue Book value, you could also receive a special three-day, two-night mini-vacation package [including] $500 in grocery coupons and 100 rolls of film.”
Accordingly, the IRS has become more aggressive in auditing and in pushing for legislation to more closely regulate these deductions, and they have been successful. The American Jobs Creation Act of 2004 holds that owners can no longer use the fair market value of vehicles worth more than $500. In order to deduct the donation, the owner must wait until the car is donated, and sold, then use that value. If your vehicle is worth more than $500, procure and file IRS Form 8283 and file it with your taxes. If your car is worth less than $500, you must use the Fair Market Value listed in the Kelley Blue Book or NADA guide. Either way, be sure to get a receipt.
The IRS has published a ‘Doner’s Guide to Car Donations” to help you value your car for donation – IRS Publication 4303 for a copy. You will need Adobe Reader to view this document – click here to download the free Reader.
All charitable donations must be made in the current tax year, so you will want to complete your donation by December 31 to claim it on your taxes. You must also itemize instead of claiming the standard deduction – use the long Form 1040 and Schedule A. Check with a tax professional to make sure you won’t be penalized to the point where it makes no sense to donate.
Make sure you have clear title to the vehicle and that it is free of liens. Charitable groups will not accept vehicles without clear title (completely paid for) or leased vehicles.
ARE THERE ANY INCENTIVES?
There are some. Kars4kids offers a free 2-night and 3-day hotel stay in such wildly popular resort destinations as Mc’Afee, New Jersey, Redmond, Oregon, and Lake Conroe, Texas.
But if you happen to live in Seattle, you may qualify for a program called “The One Less Car Challenge.” Seattle’s website, here, says the program includes one level of participation that rewards you if you:
o Donate a car so that “your household has more drivers than cars.”
o Do not replace the car for a year.
o Are able to furnish documentation of the donation.
o Sign a contract.
And what does the participant receive in return? They get:
o $600 worth of driving hours in a Flexcar – similar to renting a car. These cars are parked all over the city; when you want one, you call or get online and reserve a time. Drive the car for the agreed time and return it. At the end of the month, you’ll get a report on the hours used.
o Free membership in a two bike clubs (a $50 value) and a 10% discount at bike shops, plus discounts on safe riding lessons.
o Three posters, and a subscription to “Frugal Environmentalist.”
See? That’s all there is to it. So get out there and mow your lawn, and make some poor non-profit organization happy today!