Many people need a free car. They may currently be out of work and are trying to find a job, but cannot get to it without a car. Some people needing a car may be women who are now divorced and have no way to get to work and cannot afford a car. Still others may be victims of domestic violence. Car donations made to charitable organizations can help these people and give you a tax-deductible tax break, too.
Many charitable groups now accept donations of cars. Once they receive a car, it is either sold wholesale at an auction to car dealers or it may be sold for parts to an auto salvage yard. Some of these organizations will also accept other kinds of vehicles, such as motorcycles, trucks, boats, farm equipment, recreational vehicles, aircraft, riding lawnmowers, motorized wheelchairs, and even construction equipment.
Get a Tax Deduction for Your Car
The good news is that you can get a tax deduction for your used car or other vehicle. Even vehicles that no longer run and have been sitting in your yard for some time may qualify. In most cases, the charitable organization will pick up the car for you.Some organizations—especially those that are looking to give away cars to people that need them—will require the car to be in working condition. The kind of car or vehicle they are looking for can usually be found on their website.
How It Works
As an example, Goodwill—because they want to give away working vehicles—requires that the vehicle is in running condition. You provide the information about the car (year, make, and model) online or in a phone call, and schedule a car donation pick-up time. They will pick up the vehicle at no cost to you.In nearly all cases, the vehicle’s title will be required. It will have to be signed and free of any liens. If a title cannot be found, your tax write-off is apt to be very limited because they will probably have to sell it for parts.
Once the car is sold, you will receive a receipt for it with the information you need to get a tax deduction. All paperwork is handled by Goodwill or other charitable organization, making the process very quick and easy for you. The receipt will usually be sent within 30 days after the sale.
IRS Regulations for Vehicle Donations
The Internal Revenue Service (IRS) requires that the receiving organization must use charity cars for one of three purposes. They include:- Using it in a significant way—such as delivering meals on wheels.
- Make major repairs to the vehicle—more than just painting or cleaning it.
- Sell it to a needy person for considerably less than its value for transportation.
The Tax Deduction
Donors are allowed to get a tax deduction for the vehicle. When the above three rules are followed by the organization, the donor may deduct the fair market value of the vehicle.If the organization chooses to sell the vehicle, the sale price may be less than $500, but the greater price (fair market value) may be used. When a vehicle sells for more than $500, Investopedia says that you must also attach Form 8283 to your taxes. If the car sells for more than $5,000, you will need to include an independent appraisal and certification for the charity.
Investopedia mentions that when you make a non-cash donation, it may be a trigger for an IRS audit. Supplying the correct documents with your tax forms will help reduce the possibility. Also, remember that deductions for donations to charity cannot exceed 50 percent of your adjusted gross income.
The IRS gives some ideas on how to price your vehicle. It may not be as straightforward as you would think, so reading the document before claiming the deduction could save you from an audit. An example they give is for a car that needs some repair work. Even though a bank or credit union may value the car at one price before you donate your car to charity, you can only claim the sale price after the car is repaired.
Choosing the Right Charity
Not every organization that claims to be a charity is approved by the IRS. You can verify the organization’s 501(c)(3) approval by going to the IRS’s Search Tool. The website lists all approved organizations.Before you donate, the Minnesota state attorney general advises that you find out how the charity will use the car. It is even more important if you want the money for the car to go to specific purposes because some of the organization’s goals for their money might surprise you.
You also want to discover whether or not the charity will conduct the sale of the vehicle itself or have a fund-raising company do it for them. If a fund-raising company is used, only part of the money gained from the sale will go to the charitable organization and some will go to the company handling the fund-raising.
Donor’s Responsibility for Liability
Most states require that the donor remove the license plates from the vehicle before donating it. After filling out a form stating that the vehicle has been donated, it enables the donor to be free of any further liability claims.Reputable Car Donation Charities
Many organizations will give away cars for free. They include charities, nonprofit groups, churches, dealerships, and more. Groups such as Goodwill, the Salvation Army, Habitat for Humanity, and some community action agencies can direct people to get a free car, or the organization may give a grant to get a free car. Veterans and active-duty military personnel can also get free cars.You can find a list of many organizations nationwide where you can donate car for tax credit at NeedHelpPayingBill. These charity groups help many people get a free car to get out of poverty by enabling them to get a job, help single moms to get work and an income, help people get training for a job, or help someone with a low income to start a business, etc.
The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
