How to Donate your Car to Charity

Donating A Car is Not as Easy as it Sounds

When donating your car to charity, there are two things that you want to ensure happens:

  1. The charity gets the full benefit of your vehicle donation.
  2. You get full taxable value for your donation from the IRS (if you itemize your tax deductions).

And in order to do so, it’s not as simple as driving up to your favorite local charity, handing them the keys, and having them hand you the receipt with a tax deductible $ amount on it. Here are the steps you will need to take to ensure that both of the above happens. Note that the same rules apply to boat donations and airplane donations as well (although it might be a lot harder to ‘drop the plane off’ at the local charity).

1. Avoid the Rif-Raf

There are hundreds, maybe thousands of for-profit companies who will gladly take your donated vehicle and keep most of the proceeds for themselves. Avoid the middleman in order to benefit a true charity, not a for-profit business. Step 1 is really that simple.

donating a car to charity

2. Find the Right Charity to Donate your Vehicle to

The charity that you donate your car to must be a 501(c)(3). If you’re unsure whether or not the charity is a 501(c)(3), you can check out Charity Navigator or view a complete list of approved IRS charitable organizations, or Publication 78. You should also take a look at the Better Business Bureau Charity guide if you’re looking for ideas on who to donate to.

Then contact your charity of choice and see if they take vehicle donations and what they do with the vehicles.

3. Drop your Vehicle Off

If possible, tow or drive the vehicle to the charity or the auction site for the charity. It may cost you some money to get it there, but it’s simply the right thing to do. Maximizing your own benefit jeopardizes the good will behind the donation in the first place.

4. Get a Receipt when the Charitable Organization Sells your Donated Vehicle

To avoid an IRS audit or cover yourself in the event of one, you’ll need more than a good faith estimate. When your donor recipient sells the vehicle (usually at auction), then you will need to gather a receipt of how much they made in the sale. This is how much you can deduct in your taxes. Keep the donation receipt in case you get audited by the IRS.

5. Use Fair Market Value (FMV) for your Car Donation when Possible

There are certain cases when you can used Fair Market Value, or FMV, for your donation. This is usually a higher value than you will be able to get elsewhere. To find fair market value, use Kelly Blue Book (KBB) or NADA. Here is when you can use fair market value:

  • when the charity keeps and uses the vehicle, versus selling it.
  • when the charity makes improvements to the car prior to selling it.
  • when the car is sold at a discounted price to a person with a low income.
  • if the car is worth less than $500.

Whether the car is sold at auction, used by the charity, or less than $500, you should always get a receipt and hold onto it.

6. Tax Forms for Car Donations

Making the IRS happy goes beyond just getting a receipt and deducting your donation. You have to include the right forms. And according to form 8283, if the value of your vehicle donation is over $5,000, you’ll need an appraisal. Here are the forms you’ll need to include with your tax return: IRS noncash charitable donation form 8283, form 1098C, and form 8453. If you’re having issues, I’d recommend checking out my picks for the best tax software to help guide you.

Note that in order to claim a vehicle tax deduction, you will need to forego the standard deduction and itemize your taxes for the tax year that you donate. Only about 1-in-1o filers are currently doing this.

7. Feel Good About your Deed

Donating a vehicle can result in a huge benefit for a worthwhile charity and for your taxes as you lower your taxable income (which could potentially push you into a lower tax bracket). This is one of those cases where everyone wins if you do things the right way to maximize the benefits for both parties. Car donation FTW!

Car Donation Discussion:

  • Have you ever donated a vehicle?
  • Was it easier/more difficult than expected? Any lessons learned?
  • Did you have to tow it in?

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  1. Ron Ablang
  2. Julie

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