Charity auto donations are increasingly more common and can benefit both the donor and the charity. Donating an auto to charity allows a donor the chance to help fund a cause which is important to him or her. Charities which help military veterans or child organizations are both popular, as are car donations to fund medical research.

Many wonder how to donate a car to charity. Before making a donation, donor’s should research charity organizations to confirm if the donation will be tax deductible and to understand how the auto will be used by the charity. Identifying which information will be needed for future tax preparation, as well as how to avoid charity scams, will ensure that the auto donation is a happy experience.

Identify a Reputable Charity With an Auto Donation Program

It is important for donor’s to find a reputable non-profit charity, since donations are not necessarily always tax deductible. To maximize the charity benefit, understand how the auto donation will be used.

Confirm that the charity is indeed tax exempt and therefore the donation is tax deductible
Confirm how the charity will use the vehicle and whether it will be resold
Get a receipt for the car donation that includes the date and records the vehicle information
Document the car value before donating. Non-cash donations are a common IRS audit criteria. Consider getting an a written appraisal for future tax preparation.
Establish Auto Donation Value Prior to Making a Charitable Donation
Donors are responsible for reporting an auto donation according to current IRS guidelines. Typically, a form is filed along with a donor’s annual tax return to report the donation. Determining fair market value and providing accompanying proof must be done prior to donation.

Cars worth more than $5,000 must have an independent appraisal before donation.
Cars less than $5,000 can be valued based on the Kelley Blue Book fair market values based on the vehicle’s model, age, mileage, and condition.
Document car interior and exterior with photos. Also, keep any receipts for upgrades made to the vehicle that will verify the car’s value.
If the charity sells the car, the charity is responsible for notifying the donor or the resale value. The donor cannot claim more than the actual resale value for the donation.
If the charity does not sell the car, the charity must provide the donor with a receipt.

Avoid Auto Donation Scams

Before donating a car to charity, review how a charity intends to use the car. Some charities may work with a middleman who is a for-profit business which reconditions the car for resale. Although a portion of the car sale will be returned to the charity, the for-profit business will usually subtract any reconditioning work, cost of towing, or advertising.

Unfortunately, not all middlemen work in good faith. It’s been reported that cars may actually be further disabled in order to attain a low resale price for the charity. The cars are then reconditioned and resold at a higher price in order t maximize revenue for the for-profit business while bypassing the charity.

Remember to Plan for Annual Taxes

An auto donation can bring satisfaction to both the donor and charity program but first learn how to donate a car to charity. Donor’s should take time to find a charity which is meaningful to him or her. With proper planning and research, a car donation can be quick and painless.

A little work upfront will save time when preparing taxes at the end of the year. In order for the donation to be tax deductible, a donor must verify the charity’s non-profit status and record the fair market value for the vehicle with substantiating proof.