How to give your car to charity

For weeks, we've been inundated with commercials encouraging us to buy, buy, buy. On Thursday, while warm turkeys still sat on America's dinner tables, some of our biggest retailers opened their doors, hoping that bright, shiny products would fly off the shelves without too many shoppers being trampled.

But there are other ways to give this holiday season -- ways that don't involve standing in long lines in the freezing cold, or elbowing 12-year-olds to get your hand in a bargain bin. Some of you may have the perfect re-gift sitting in your driveway or gathering dust in a garage. We're talking, of course, about your old car.

Who should give and why?

The "why" of giving is the easy part. Despite the late Ayn Rand's constant complaints, philanthropy is alive and well in the United States. Nowhere else in the world do individuals choose to give so much to help those in need.

Donating cars to charity is part of that process. When charities take used cars, they typically repair them and sell them to the public, or when vehicles are beyond repair, they're sold for parts and scrap. That money gets funneled back into programs at the charity in question.

More On This...

    The question of who should give is a bit trickier.

    If you've got a second car that you no longer need, chances are good that it's a candidate for a charity gift. But what if you only have one vehicle -- one that you use to get around? There are at least two instances in which donating that car to charity can make solid sense:

    • If you itemize deductions on your tax return and you need an additional deduction this year -- say, to counter some capital gains you've made -- donating your car to charity can help.
    • If your car (or motorcycle or four-wheeler or boat) is worth less than $500, giving it to charity might also make sense. You can generally claim up to $500 of the donated item's value without providing a receipt from the organization's re-sale of your gift. 

    How to give

    Donating your vehicle is fairly simple, if you're willing to invest a bit of time up front. Better yet, most of your research can be carried out online or over the phone, from the comfort of your living room:

    • Start by identifying the right charity. There are many, many organizations that accept used vehicles. Find one that does work you believe in.
    • Ask how the charity would use your gift. As mentioned above, many organizations sell donated vehicles to the public or sell them as parts or scrap. Other organizations use donated cars to provide services -- for example, delivering meals to shut-ins. That's a great and worthy cause, but it means that the organization won't be selling your vehicle, so you won't get a receipt documenting its actual market value. You'll have to estimate that for yourself. 
    • Ask whether the charity uses a broker to sell donated cars. That's fine and legal if they do, but keep in mind that in such cases, the charity won't receive the full benefit of your gift, since the broker will take a cut. The same goes for vehicles sold at auction.
    • Confirm that the charity is a 501(c)(3). There are many schools, churches, museums, and other organizations that qualify for 501(c)(3) status from the IRS, but some haven't filed the proper paperwork. If the company hasn't received at least a preliminary ruling from the IRS, your donation won't be tax-deductible. You should also look out for other organizations that seem like 501(c)(3)s, but are actually 501(c)(4)s -- typically, lobbying groups. Contributions to 501(c)(4)s are almost never tax-deductible.
    • Ask the charity how your car will get re-titled. Chances are good that once you've donated your vehicle, it will be repaired or broken down, then sold without incident. But unless there's a formal means of transferring the title from you to the charity, you could still be on the hook if something goes wrong. State laws vary with regard to the transfer process. Make sure you know where you stand.
    • Hold onto all related paperwork -- your original purchase receipt, recall notices, and anything else that might be important. If the charity sells your vehicle, ask for a copy of the sales receipt, too, so you can add that to your folder. This will come in handy if there are questions down the line.
    • Deliver the car in person. If you bring the car to the charity yourself, you can make sure all of your last-minute questions are answered. You'll also save the charity the towing fee, funneling that money back into the organization's programming efforts.
    • Perhaps most importantly, if you have questions or concerns about the donation process, contact a professional. We're happy to offer general guidelines, but accountants and lawyers will be able to offer specific advice appropriate for your situation and locale.

    There are many worthy charities doing business in America, and all of them could use your help. Some advisors suggest that donors stick with well-known, national organizations like the United Way, Habitat for Humanity, or Volunteers of America, but there are plenty of smaller nonprofits that are just as hard-working, ethical, and deserving. Do your homework, and you can make nearly any charity's day a little brighter -- not just this holiday season, but throughout the year.

    View original post