All Car Donation Programs Are Not Created Equal
Scenario A: It's got four wheels and an engine. Sometimes it even runs. But the mechanic's estimate is more than you want to pay, so it's time to get rid of the old clunker in your driveway. A 501(c)(3) public charity you like will take it off your hands. You'll dispose of your car, support a favorite charity, and get a nice income-tax deduction. It's the best of all possible worlds—isn't it?
Scenario B: Your 501(c)(3) organization accepts the donation of a used car, turns it over to a broker to sell, and receives a portion of the proceeds. Your nonprofit receives some much-needed cash, the donor gets a deduction, and the broker makes some money. It's a win-win-win situation—right?
In these two cases, yes. But vehicle donations to charity don't always work out that way. To clarify the situation, on June 29 the IRS issued two new publications on the topic, one for donors and one for charities.
Donors Beware
"A Donor's Guide to Car Donations" (IRS Publication 4303) offers the following advice to individuals thinking of giving a used car to charity:
"Check out the charity"
Only gifts to qualified nonprofits are deductible. If you plan to deduct your vehicle donation from your taxes, you need to verify that the nonprofit receiving the car is a qualified organization before you turn over the keys and title.
Note: If you find a nonprofit on GuideStar, it's likely that your gift to it will be deductible. To be sure, look at the fine print that appears under the organization's EIN on the first page of its GuideStar Report. If it is a 501(c)(3) public charity, your donation will be deductible. If the nonprofit is exempt under another subsection of the tax code—for example, a 501(c)(4) organization or 501(c)(6) entity—contact the organization to ask about the deductibility of your gift.
"See if you'll get a tax benefit"
You can deduct charitable contributions from your taxes only if you itemize your deductions on Schedule A of your 1040. There are also limits to the total amount a donor can deduct for charitable contributions.
"Check the value of your car"
A car's blue book value is not necessarily the same as its fair market value—a vehicle missing a bumper or driven for thousands of miles without an oil change will have a lower fair market value than a car that is the same age and model and has been well cared for. Only the fair market value of the vehicle you donate can be deducted from your taxes.
"See what your responsibilities are as a donor to charity"
Make sure you obtain all necessary receipts and, if you declare your car's value as more than $5,000, that you have a written assessment for it.
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