Donating your car to charity is an excellent way to make a difference while also getting rid of clutter around your yard. However, it can also have other personal benefits, including a potentially hefty tax deduction at the end of the year. While donating isn't usually too hard, it's still worth taking a little time to prepare so the process goes smoothly and you can maximize your potential gains.
Once you've decided on a charity, it's time to call them up and ask a few questions. The good news is that you should usually be able to schedule your pick-up on the same call, making it relatively quick and easy to arrange for your donation. If you're ready to put your old car to more charitable use, be sure to ask these three questions first.
1. How Will the Charity Use the Car?
Charities typically use their donations for a variety of different purposes. Some charities may use the vehicle to raise funds by selling it at auction, while others may donate usable cars to individuals in need. Some charities may even keep the car for use by their employees or find some other productive purpose for it.
How the charity uses the vehicle will matter for your tax deduction. Your maximum tax deduction will be limited to their sales price if they sell the car. On the other hand, you can claim market value for your donation if they decide to keep the vehicle or do something else with it. If they plan to auction it, make sure the charity will send you a 1098-C with the appropriate information.
2. Are There Any Limitations?
Charities typically buy vehicles in nearly any condition, but some may have certain restrictions. For example, charities that sell or donate their cars may only want complete cars. Other charities may have rules based on practical limitations, such as being unable to take your donation if it doesn't have wheels or you've parked it in a hard-to-reach area.
Asking about these restrictions now will save you time and trouble in the future. You should also let the charity know about any significant issues with the car, such as missing body panels or a stripped interior, in case that information presents any problems for them.
3. Do You Get Anything for Your Donation?
No one gives to a charity with the intent of receiving something in return, but some charities provide gifts or other forms of compensation for donations. You'll need this information for tax purposes since it can impact your maximum possible deduction. While small "thank you" gifts generally aren't a concern, you may need to be aware of their value to avoid any tax headaches.
If you are looking to have a more positive effect on your community, look for a charity with which you can give car donations for veterans.
