So you’ve got a car that you’re ready to let go of, and you’re wondering (just as the rest of the world does with any decision):
- What’s in it for me?
- Would it be better not to?
A decision should always be made with as much information as you can get.
Even though researching can be difficult or dull, it’s always worth your while to invest the time and effort.
After all, your car has served you well; why not make sure it continues to do so even as you let it go?
When it comes to donating a car, there are advantages and drawbacks.
These will differ with the charity you choose to donate to, so let’s go over some of the more common ones.
Pros of Donating Your Car
- Convenience. Very often, the charity will come and pick up your car for free. Also, they’ll usually help you with any paperwork you need and will take care of selling your car for you. You won’t have to deal with buyers, permits, towing, or anything else that comes with selling a car.
- Tax Deductions and Other Benefits. If the charity you choose is a registered 501(c)(3), you can claim the fair market value for up to a maximum of $500 if they sell your car for under $500. If the car sells for more than $500, you can claim the full sale price for your tax deduction. Also, some charities offer other incentives.
- Closure. Once your car is taken away, you’ll no longer have to deal with it sitting in your driveway. You’ll also be free of maintenance costs, insurance payments on the car, etc.
- Benefaction. You’ll be contributing to a cause that you care about and whose work you support.
- Condition Doesn’t Matter. Your car doesn’t have to be running for most charities to take it.
Cons of Donating Your Car
- Although this doesn’t happen very frequently, some people have been audited as the non-cash notation raised suspicion for the IRS.
- Some charities aren’t legit, and some of them are actually scams (check to make sure the organization is a valid and registered 501(c)(3), like ours). Some are valid, but might be inexperienced, or don’t offer good customer service, which may make the process difficult for you. In contrast, Kars4Kids’ success has been built on a proven track record, both in its car donation practices and its charitable work.
Donating sure gives you cash, but it doesn’t give you instant cash. You do have to wait for tax day to see dividends.
- You may not get as big a deduction as you think, so make sure you know what to expect. If your car sells for more than $500, Kars4Kids will send you a tax receipt for the total sale price. Otherwise you can claim the fair market value of the car, up to $500.
- You’ll also need to itemize your deductions if you want them to be worth anything on your taxes.
- If your car has a lien on it, you likely won’t be able to donate it.
- You may be missing the necessary documents required to donate. Different charities have different requirements; Kars4Kids can usually pick up your car regardless of the paperwork, or help you acquire anything you’re missing.
So what does this mean for me?
Get professional advice
The first thing you’ll want to do is speak to your accountant.
Understand your situation
Depending on the circumstance, it may in fact be more worthwhile to sell, repair, or junk your car.
Find the right charity
If the donation is the best option, your next step is to do your research.
- You’ll want to find out if the charity you’re looking to donate to is a registered 501(c)(3) (more on that here)
- How they deal with car donations
- What their process is
- What you’ll need in terms of paperwork and ID
- Where the money goes, and so on.
Contact the charity
Call up the charity yourself and ask them to explain their procedure.
Talk to previous donors
Speaking to people who’ve previously donated is always a good idea.
Ask them any and all questions you have
- What paperwork will you need?
- Is there anything you have to do with your car before they come to get it?
- Can you still donate if you’re missing a title, insurance, etc?
Once you have all the information, you can then go ahead and take action.
Whatever you end up doing with your car, doing the proper research first will help you feel confident that you’ve made the correct (and informed!) decision.