Donating a car to charity is an easy way to get rid of an unwanted vehicle and help a cause (and receive a tax deduction), but there are things that every consumer should know before handing over their keys. The Better Business Bureau offers the following advice for those planning to donate a car or other vehicle to charity.
Do Your Research
Verify that you are donating to a charity in your community.
“Many advertisements that are heard on the radio or seen on television are for national charities, or for charities located in other states. If you are unfamiliar with the charity that is asking for donations, make sure that you do some research before donating. You may be disappointed that you are not helping out a local cause,†says Paula Fleming, vice president of communications and marketing at the BBB.
Many organizations accept donated cars, so by doing a little research, it is easy to find a local organization that matches the charitable concerns of the national advertisement that was heard.
How Will the Charity Benefit?
Contribution requests for donated cars have increased dramatically. It is crucial to investigate how the charity will benefit from your vehicle. There are several ways that a charity can financially benefit. It can sell your car, or parts of your car, or it can use the vehicle to fulfill a need within their program.
If the charity is using a third-party broker, it may only receive a percentage of the retail price of the car.
Finding out how the charity plans to use the car is significant, because it may make your donation ineligible for a tax deduction. “A great place to start your research is with the BBB Local Charity Review Program at boston.bbb.org,†advises Ms. Fleming.
Tax-deductible or Not?
If you plan to file a tax deduction for your donated vehicle, there are a number of things to consider.
First, verify that you are donating to a tax-exempt organization by checking Section 501(c)(3) of the Internal Revenue Code. You should also verify that the organization is eligible to receive contributions that are deductible as charitable gifts. This can be done online at www.irs.gov/search/eosearch.html, or by asking the charity for a copy of its tax-exempt status determination letter. If the organization is not a charity, you can only deduct the fair market value of your donation — which is the price that the car would sell for in its current condition. If you claim that the car is worth $5,000 or more, you will need to get the car appraised for IRS purposes.
If you plan to claim a car donation of $500 or more, you will need to complete IRS Form 8283 to attach to your tax return. It also is a good idea to take photos of the car and to keep copies of current guide value estimates. In addition, you will need proof that you made a charitable gift. The easiest way to do this is to transfer the title of the car to the charity and keep a record of doing so. This will be helpful if the vehicle is involved in an accident or other mishap after you have given it to the charity.
Before you donate your vehicle to any charity, it is essential to make sure that your donation is being used for the greatest benefit and that you are taking full advantage of any potential tax deduction. Before donating to any charity or organization, go to www. bbb.org for more information.
Source: Better Business Bureau
