A form of charitable giving that's becoming more common is the donation of a used vehicle. This approach may allow you to make a larger contribution than you otherwise could afford. But before you give away your wheels, make sure you're contributing to the right kind of organization.
By Times Staff Writer
Published June 29, 2003
1. It can be a sweet deal. If you donate your used car to a reputable charity, you won't have to deal with the hassle of selling it, and you'll receive a tax deduction for the fair market value of the vehicle. That said, the process is more complicated than making a single phone call and then enjoying a fat tax break.
2. Is the organization really a charity? Ask for a copy of the group's Internal Revenue Service determination letter that verifies it is tax exempt as a charity under section 501(c)(3) of the Internal Revenue Code. If you don't take this step, you may give your car to an organization that is not eligible to receive tax-deductible gifts.
3. Ask the charity for other key forms. Get copies of its latest annual report and IRS Form 990, which detail how the organization spent its money in the past fiscal year.
4. Do some additional sleuth work. Call the state Department of Agriculture and Consumer Services toll-free at 1-800-435-7352 to verify that the charity is registered to solicit money in Florida, and check out the charity on the Internet by browsing the state's "Gift Givers' Guide" at doacs.state.fl.us/cs/gift-givers/search.html.
5. Determine what happens to the donated cars. Will the charity use your vehicle to provide transportation for needy people, or give the car to a low-income family, or allow mechanics in training to work on it? Or will the car be sold? If so, how much of the proceeds will the charity actually get? Sometimes it's a paltry amount, so it pays to ask.
6. Get a receipt. It's important to have documentation showing that you donated your car. It will be up to you, not the charity, to put an accurate value on the car donation when you file your tax return.
7. To calculate your tax deduction, you need to determine the "fair market value" of your vehicle. If the car is worth more than $5,000, an appraisal is mandatory. If its value exceeds $500, you must attach IRS Form 8283 to your tax return.
8. Will an intermediary be involved? Some charities may use a third party, such as a car broker or auto auction company, to handle your donation. Find out how much of the proceeds the intermediary will keep, and be sure to transfer your title to the name of the charity, not the name of the intermediary.
9. Don't be duped. If a charity or intermediary asks you to leave your title and keys in your unlocked car so it can be picked up when you're not there, don't do it. You're likely being set up to have both the car and the title stolen. Make the title transfer in person.
10. One last step. Don't forget to cancel your auto insurance.
