Donating Your Car to Charity

Sarah Buxton/freeimages
Sarah Buxton/freeimages

You did it. Despite student loan payments, rent, and utilities, you’re now earning enough to add a new car to the mix. You’ll no longer be paying enough in repair bills to send your mechanic’s kid to college, and you’ll have safe, reliable transportation.

What to do with your old car? If it’s a beater or a very old car, you’ll get very little for it. If you’ve ever thought of donating your old car to charity, here are a few things to keep in mind:

Is It A Qualified Charity?

The IRS has an online tool for checking whether or not a charity is qualified: As a general rule, the following categories of charities are qualified:

  • Public schools, colleges, churches, volunteer fire departments, utility emergency funds, local animal shelters or humane societies and rescue organizations, health-related organizations, research hospitals and large charities such as the Red Cross, American Heart Association, or the United Way.
  • Any charity that is designated as 501 (c)(3) charity is a qualified charity. If your charity of choice has an up-to-date website, that information is usually found on the “About Us” page.

How Much Will I Get?

Much of this will depend on how the charity will use your donated vehicle. If they sell the car, you can only deduct the sales price. Once the car is sold, the charity will send you a copy of the bill of sale. If the car sold for $2,000 despite a fair market value of $3500.00, you can only deduct the $2000.00 as a charitable deduction.

If the charity doesn’t sell the vehicle and uses it instead, you may be able to deduct the fair market value of the car. For example, if you donate your old SUV or minivan to the local senior center and they use the vehicle for Meals on Wheels, you can claim the fair market value, or Blue Book Value of the vehicle.

In this case, the safest thing to do is to obtain a letter or other written proof they will be keeping the vehicle for their own use. This documentation will come in handy should the IRS ever question this deduction.

Getting a new car is a welcome relief if you’ve been driving an older car.  You’ll have steady, reliable transportation with all the new tech features and gadgets. If you’d like to donate your old car to charity,  make sure the charity is a 501 (c)(3) charity in order to be eligible for the charitable contribution deduction.

The amount of your deduction will depend on how the charity will use the vehicle, either reselling it or using it for their own purposes. Either way, your contribution will benefit your community, your designated charity, and you’ll be able to deduct your contribution from your taxes at the end of the year. Clearly a “win-win” for everyone.