Maximize Your End-Of-The-Year Car Donation With These 4 Tips
The end of the year is drawing near, and it’s the best season in which to make your big charitable donations. If you’re considering getting rid of your clunker of a car by donating it to an organization in need, now is the time to do so. There are many charities that will gladly take your old car and turn it into much-needed funding. Groups like Kars4Kids, Habitat for Humanity, and the American Cancer Society accept car donations in order to continue their life-changing work.
Unfortunately, donating your vehicle can be difficult. Choosing to donate your car isn’t as straightforward or simple as donating cash or clothes. Car donations come with a set of special rules.
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As Mercury News reports, vehicle donations are considered one of the most difficult and costly ways to make a charitable contribution. Giving your car to charity takes time, knowledge of IRS rules and requirements, paperwork, and sometimes even money. If you don’t know what you’re getting into, you could end up spending more and causing a huge headache simply by trying to give to a charitable cause.
Here’s how to turn your car donation into a worthwhile charitable contribution–and how to help the charity of your choice the most of your generous gift.
1. Do Your Research
In order to claim your car donation as a tax deduction, you need to have proof that you donated to a reputable and recognized charity. The government gives official charities the designation of 501(c)(3). This means the group is non-profit, and that it uses all income, revenue, and donations to perform charity work.
If the organization you want to donate your car to doesn’t have 501(c)(3) non-profit status, you won’t be able to receive any kind of deduction off your yearly tax return. You can check the IRS website to confirm whether or not your favorite charity is registered.
2. Pick The Right Charity
Once you’ve narrowed your selection down to only 501(c)(3) charities, it’s time to pick the right one. All charities do incredible work, but some are more effective and efficient with their funding.
The trick with car donations is to make sure the organization can actually benefit from your used vehicle. Charities use donated vehicles in two ways: the organization will either drive your vehicle to perform its work, or will scrap your car for cash. CNBC says that the majority of donated cars are scrapped for only $500–so before you donate, it’s important to ask the charitable organization if they’ll actually benefit from your car or its worth.
3. Drop Your Car–and Its Paperwork–Off
A car donation becomes less of a gift if you end up having to spend money to make the donation–and it’s even worse if you saddle the charity itself with these expenses. First, make sure that you and the charity don’t have to pay to have the car delivered. Some organizations will pick up your car and tow it away from your home; others require car donations to be delivered. Hiring a towing company can be expensive, so drive the car yourself to save both sides money.
Once you’ve gotten the car to the charity, have all of its paperwork with you. The DMV charges money for lost titles, and will charge you or the charity if the title isn’t available. Save yourself and the charity extra cash by having the right documents on hand.
Lastly, make sure to get a receipt. This will help you and the organization accurately report the donation to the IRS and eliminate any costly miscalculations.
4. Itemize Your Tax Deductions
The biggest way you’ll benefit from your car donation is on your tax return. It’s crucial to accurately and specifically report this big contribution, as the value of your car can up your tax refund significantly.
You have two choices on your tax return: you can take the standard refund or itemize your deductions. If you choose the standard refund, you’ll just deduct the IRS’s set amount. Choose to itemize, and you’ll need to list the exact value of your car. This could be as little as $500 or as much as $3,000. Itemizing makes the biggest financial difference if your car is worth thousands. If your car is only worth hundreds of dollars, it’s smarter to take the standard refund and reap those benefits.
Do a Little Good with Your Old Car
Donating your car is a wonderful way to help a charitable cause. Although it’s a simple gesture, it can give an organization a much-needed method of transportation or an influx of money.
Before you make your vehicular donation, just be sure to do your research. You want to make certain you have the correct forms, the right information, and the best plan to reap the benefits when tax time rolls around.