Do you have an unused vehicle sitting in your driveway or garage collecting rust? Do you dread the hassle of trying to sell it? Why not consider donating it to charity? The process can be simple way to dispose of an unwanted vehicle, provide cash to a worthy cause, and as a bonus, you can earn a deduction on your income taxes.
An increasing number of charitable organizations are accepting donations of vehicles. Through third party car donation services such as donateacar.com, the process is relatively simple and fast. The car donation service will pick up your vehicle, help with title transfer, and in most cases, sell the vehicle at an auction and send your selected charity a check for the proceeds less a handling fee. Different types of vehicles can be donated, from cars and trucks to motorcycles, RVs and even boats. The vehicle usually doesn’t even need to be functional. In general, all that is needed is that the vehicle have an engine, a clear title, and the ability to be towed.
To begin the process, choose a charity that is eligible to receive tax deductible contributions, and that accepts car donations. You can review the IRS Exempt Organization Select Check tool online at https://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check to determine if your intended charity is eligible to receive tax deductible contributions.
Once you have chosen your intended charity, the next step is to provide information about your vehicle to the charity or to the third party service, usually through an online form or by phone. Things you will need to provide will be the make, model, year, overall condition of the car, and where it is currently located. The service will schedule pickup of the vehicle, usually within 24-48 hours, arrange for the title transfer, and once the car is sold, provide you with form 1098-C detailing the proceeds from the sale. Hang on to the 1098-C, as you will need it to file your income tax return. Note, that if your car sells for less than $500, no form 1098-C is required.
In general, the IRS limits the deduction you may take for your donated vehicle to the gross proceeds from the sale of the vehicle. To take a deduction, you will need to itemize on Schedule A of form 1040. If your deduction is more than $500, you will need to file form 8283, Noncash Charitable Contributions, with your tax return. You will also need to attach form 1098-C to your return. For more information or help with your vehicle donation on your 2015 tax return, contact us at 1-866-287-9604
Additional resources on donating a vehicle, can be found at:
IRS Instructions for form 8283
Charity Watch – Tips for donating cars to charity
IRS Publication 4303 – A Donor’s Guide to Car Donation
Posted by Lynn Ward, CPA