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Best charity to donate your car to

August 30th, 2009 · 2 Comments · Poverty

Do you have an old clunker that’s just about had it? Most major charities accept car donations.  Donating your car is one of those things which helps others, and helps you too.

Most charities will accept cars in almost any condition, in if your car is in undriveable condition, most charities will even arrange for someone to come tow it away for you.

Charities generally do one of several things with the car: fix up the car and re-sell it; use the parts to fix other cars; give it or sell it at a discount to those in need; or use it themselves for their own charitable work.

You may have heard that you can get a substantial tax deduction for the car. It used to be that you could claim a deduction up to the fair market value of the car. Unfortunately in 2005, the government changed the rules, and of course made them more complicated, as our government likes to do.

Today, the rules are based on how much your car sells for. If the charity decides to sells your car and does so for more than $500, your tax deduction is limited to the actual selling price (all assuming you itemize your donations, of course). The charity must provide documentation of the sale within 30 days of your donation. It’s a situation where at the time of donation you have no idea of how much your deduction will be. But if the car sells for $500 or less, you can still deduct the fair market value of your car.

Clear as mud?

It’s gotten to the point where it’s really not worth it to donate directly to charities any more. In a lot of cases, you’re better off selling the car on eBay Auto or something and donating the cash directly to the charity.

The one charity that appears to not be affected from these new rules is Charity Cars (http://www.800charitycars.org/), which is itself a non-profit organization. Because your car donation is used for the specific purpose of furthering their mission (of providing cars to lower income individuals), the car you donate can still be deducted for its full fair market value.

(Remember, that fair market value is NOT the same as sticker price–it’s the figure you get from a site like Kelley’s Blue Book or Edmunds).

So to sum up, here’s an example: Let’s say you have a car whose fair market value is $2000. Let’s say you want to donate it to a charity (who can sell it for $600). You could sell for $1,000 on your own. You’re in a 33% tax bracket:

  • You can sell it on eBay for $1,000, donate the $1,000 to charity, itemize the $1,000 cash donation and earn $333 in tax savings.
  • You can donate it to the charity who will sell it for $600. You can itemize up to the selling price of $600 and earn $200 in tax savings, provided the charity gives you the sale price in writing within 30 days.
  • You can donate it to a charity whose primary mission is directly supported by car donations like Charity Cars. You can itemize up to the fair market value of $2,000 and earn $667 in tax savings.

I should give you the standard disclaimer that I’m NOT a tax professional and that none of this is intended to be tax advice. See your tax professional and read up on the IRS documentation on the subject before you take any steps. But if you’re looking to donate an old car, here’s how you can help someone in need while still getting the maximum tax benefit for yourself. Until your Congress decides to change its mind again, of course :)

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2 Comments so far ↓

  • Cars4Charities

    There are hundreds of respected charities for you to donate a car to at Cars4Charities. they are a 501 (c)(3) charity and will handle your car donation properly.You’ll be eligible for a tax deduction of at least $500 on your itemized federal return. In addition, your car donation will benfit a worthy cause.

  • Carla

    No matter what charity you donate your car to you should always assess the validity of the organization.

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