How to donate a car or boat to charity

It sounds so simple: Donate your used vehicle or boat to charity, avoid the hassles associated with selling it, and score a tax deduction at the same time. Everybody wins, right?

Not necessarily. As the saying goes, the road to h-e-double-hockey-sticks is paved with good intentions, and it can be surprisingly easy to fumble this well-meaning act.
Before you hand one of your biggest assets over to anyone, read the following tips to be sure you’re making the right moves.
1. Avoid middlemen. Numerous for-profit intermediary organizations advertise aggressively on TV, billboards and elsewhere, offering to help you donate your vehicle to charity. Here’s the catch: These organizations typically keep about 50 percent to 90 percent of the vehicle’s value for themselves, and the charities don’t get what they could have gotten. To prevent this, check directly with charities you admire and find out whether they accept car or boat donations.
2. Find a worthy charity. If the charities you normally support aren’t equipped to accept such donations, do some homework until you find a reputable charity that is. You can research charities’ track records online at this Better Business Bureau site and through Charity Navigator. 
3. Check the math. If you still feel compelled to use an intermediary organization – possibly because you’re busy – at least ask the organization how much of the car or boat’s value will go to charity. If the organization simply gives charities flat fees — say, $100 for a used vehicle regardless of its value, or $2,000 a month — your donation may not be eligible for a tax deduction.
4. Know the status of your recipient. In order for you to qualify for a deduction, the charity that gets your donation must be an IRS-approved 501(c)(3) organization. Your church, synagogue, mosque or temple likely qualifies. (Check first just to make sure.) You also can visit the Internal Revenue Service’s Web site and search for Publication 78 to find other qualifying non-profit organizations. (Just type “78” into the search field on the IRS home page and you’ll be directed to the right publication.)
5. Do the delivery yourself. Once you’ve identified a worthy charity, recognize that it will have to pay someone to pick up your car or boat for you. To help the charity maximize the benefit of your donation, drop the car or boat off yourself.
6. Transfer the vehicle with care. Want to eliminate all risk of running up parking tickets and other violations after you’ve said goodbye to your donated vehicle? Then formally re-title the vehicle to the charity, and report the transfer to your state’s department of motor vehicles or licensing. Never agree to leave the ownership space on the charity donation papers blank.
7. Your estimate of the donation’s value probably won’t cut it. If your car or boat is worth more than $500, the IRS is going to want to see evidence of how much the charity got for it. (Most charities that accept these donations turn around and sell them for cash.) You’ll need to get a receipt from the charity revealing exactly how much money it made.
8. Know when you can report the fair market value. You won’t need evidence of the sales price if the charity keeps the vehicle or vessel and uses it in its charitable work, or if your donation is worth less than $500. Then you can report its fair market value based on listings from Kelley Blue Book and similar sources.
9. Keep a thorough paper trail. If your donation is worth more than $500, you’ll have to attach IRS Form 8283 to your tax return. If it’s worth more than $5,000, your documentation must include an outside appraisal. You’ll also need proof of the donation, such as a receipt from the charity and a copy of the title change.
10. Be detail-oriented. This paper trail may seem cumbersome, but think about it: This may be one of the biggest charitable donations you ever make. By taking the time to dot the i’s, you can make sure that the charity gets the most benefit and you get the biggest possible deduction.

Does Charity Car Donation Still Make Sense Under Tougher IRS Rules?

When my aging Nissan Sentra began to need several hundred dollars' worth of repairs every few months, I considered donating the once trusty blue sedan to charity. I knew of several pet charities that would be grateful. Besides, donating a car seemed so much easier than selling it. No fixing it up. No phone calls. No Tom, Dick and Harriet knocking at my door — or standing me up on a Sunday morning as I waited for Godot.

The biggest incentive, though, came from the tax deduction. At the time, the IRS was allowing donors to deduct the "fair market value" of the donated car from their taxes. So donating the Nissan, whose market value was about $2,400, meant $792 off my taxes (assuming a 33-percent tax bracket). Every year, more than a million Americans donated their cars just like this.

Too good to be true
Unfortunately, whether through ignorance, confusion or greed, a substantial percentage of car donors have been deducting the full "suggested retail price" — what a dealer would get for reselling your trade-in — instead of the fair market value. That's far more than the IRS had intended, costing the government millions in lost tax revenue.

The charities weren't making much, either. Most of the donated cars were sold by the charities for a pittance at auction, and middlemen who administered the programs on behalf of the charities took a large percentage of those meager profits.

So in 2005, the IRS changed the rule. From then on, if your car is valued at more than $500, the deduction is limited to the charity's actual selling price. The donor must attach a statement of sale to the tax return in order to receive the deduction. (The charity is obligated to provide the statement within 30 days.) You are not entitled to know the deduction amount before donating your car.

That leaves most donors in the dark — and may leave some businesses and charities in the red.
Good for government = bad for business?
Taron Reeves owns America's Car Donation Charities Center, one of many commercial fundraisers that give a percentage of profits to their charity members. Donations through Reeves' company went down 30-35 percent after the new law went into effect. What's worse, his overall profits have dropped a full 50 percent, as owners of "higher-value cars" — anything more than $2,000-$3,000 — stayed away in droves.

Since the average car that Car Donations Charities Center now receives for charity is valued at only $250-$300, Reeves has had to cut back on his overhead and expenses to maintain his non-profit business. A native Texan, Reeves says he now has to work a little smarter and a little faster than he used to; nevertheless, he remains undaunted.

"There are lots of cars out there," he said. "I look at one that's sitting in someone's yard, waiting to be donated and say, 'That's a $50 bill just flapping in the wind right there.'

"As long as we can accommodate the donor and not lose money for the charity, we'll do it."

As one door closes, another opens
Since the biggest loss for consumers is for those who own higher-value used cars, should they give up hope of donating? Not at all. Although the IRS has closed the loophole in the law, there is still a way to deduct full market value of your vehicle: If the charity uses the car itself to further its specific purpose.

For example, the nonprofit organization 1-800-Charity Cars refurbishes donated cars and provides them directly to the economically disadvantaged. Its goal is to help the needy and welfare-dependent to become stable, self-sufficient, tax-paying citizens.

"We've been going gangbusters," said CEO Brian Menzies. "We've given away cars for free to people in almost every state in the union, including Alaska and Hawaii."

In contrast to charities whose actual mission doesn't involve cars, Charity Cars has seen a 50-percent increase in donations this year. Because owners of higher-value used cars are now turning to his organization, Menzies says, "The quality of the cars has been phenomenal." Cars that aren't roadworthy are auctioned off to pay for repairing the cars that go to struggling families.

Note that the fair market value, in this case, must be determined by the donor. The government warns that, "The fair market value of the taxpayer's car may be substantially different from the 'Blue Book' value." Lower, that is. Edmunds' TMV Used Vehicle Appraiser provides an accurate valuation report of what a used car sells for in your specific neighborhood. This can be used at tax time and in the event of an audit.

Doing the math
So if you've got a car with a market value of $1,000 that you're looking to unload, you have four options.

1. Donate it to a standard charity that has 501(c)(3) tax-exempt status with the IRS. The letter you receive will state the amount it was sold for — far less than the market value. Say it's sold at auction for $250. There is a special rule that could apply if your car was sold for less than $500. If you get a written acknowledgement from the charity that meets the IRS requirements, you can claim a deduction of the fair market value or $500-whichever is less. We recommend you check out the IRS' donor information guide for more details.

2. Trade it in on a new car — never a great deal. Dealers are never excited to get people's old beater cars as trade-ins, although a late-model luxury or Japanese car might fetch a reasonable price. But dealers often use your trade-in to jiggle the terms of your new car purchase or lease, so you have to be pretty savvy not to get taken advantage of. (If you go this route, be sure to see Trading In Your Used Car first.) If you traded in that $1,000 car, you'd be lucky to get $700.

3. Donate it to an organization such as Charity Cars, which uses the car as part of its stated cause. This allows you to deduct the car using Edmunds.com's True Market Value^SM. Using the 33-percent tax bracket again, that means $1,000 x 33% = $330 in your pocket.

4. Sell it privately for around its full market value of $1,000. Though it's generally the harder road, this is what we recommend. The advent of Internet sites such as Autotrader and eBay Motors can make it much easier, though it depends if your car is in demand.

A word of caution: When it comes to tax deductions, there's more to it than your tax bracket. For example, you can't take advantage of a car donation at all unless you itemize your taxes. Other factors include your income, need for deductions, and the car's value. A certified accountant can help you decide if donating is in your best interest, or you can ask the IRS at (800) 829-1040.

So what did I do? Being the savvy Edmunds user, I knew I would be best served by selling it myself. Doing so was somewhat inconvenient and a bit strange. I literally became a "used car salesman" for a couple of weeks as I illustrated the car's features and benefits to total strangers.

In the end, though, I got $2,300 for the car, and I didn't have to worry about special IRS forms. I had sufficient money to reward my efforts and enough left over for the charity of my choice — far more than it would have received had I donated the car directly. Like so much else in life, the least convenient choice is often the most profitable.

Used Car Donation - Why Should I Donate My Car?

After owning a car for years upon years and putting several thousands of miles on it, there comes a time when you're ready to start a-new. Before you head over to the car dealership and pick out a nice, shiny new ride, you may want to place some thought into what to do with your old car. One of the best initiatives you can take to help yourself and others at the same time is to look into used car donation.
An Introduction To Used Car Donation
Simply put, used car donation is basically just giving your car to a charitable organization, who then turns around and sells it very cheaply (or sometimes gives it outright) to someone who is in need. Some people actually need a car, so that they can go out and find a job that pays well. And of course, once they have that job secured, they can begin to move upward in the world, instead of being "stuck" at the bottom.
While it is tempting to just blame "The Man" for all of the bad things that happen in life, playing the blame game will get no one anywhere. What we can do is give when we can. And used car donation is a prime example of all of the good that can come up when a person decided to donate their car to a worthy cause. When you donate your old car, you are doing more than just getting rid of a highly depreciated toy that has lost its luster for you. You are also doing your part to help another person to move up the income ladder.
And in some cases, the car can actually be sold at auction, and the proceeds are used to raise money in order to fund social programs that can do a lot of good for hundreds of people. If your community could use your car to help them out, wouldn't that be sweet?
Benefits of Donating Your Old Vehicle
One other interesting benefit to used car donation is that it can grant you a deduction on your income taxes. While the amount of the deduction will certainly never hold a candle to the original price you paid for the car, the old saying applies - "every little bit counts." Tax writeoffs are probably one of the biggest perks to donating your automobile to charity. Before you start calculating receipts to determine how much you can claim on your taxes, make sure that you are well-aware of applicable IRS car donation rules. Once all of your legalities are covered, you can sleep well at night knowing your new ride is parked safely in the garage, proceeds from the auction of your old car are being used at well-respected charities, and that you may have saved a little money that otherwise would have gone straight to Uncle Sam.