Car Donations

There are few things in life that can do as much good for everyone involved as donating a car to a worthy charity. The person donating the car is usually able to recognize a significant tax deduction on that year's return. The charity receiving the car is able to recognize a stream of income that was not there before. And finally, the person purchasing the donated car can usually appreciate a significant savings over purchasing elsewhere.

As far as a donation's tax-deductibility, you should speak with a tax professional to determine the car's eligibility (in the case of a work car or a dependent's car) and the size of the deduction. Generally speaking, you are able to deduct the full fair-market value of the vehicle no matter how much it eventually sells for at auction. This value can be found in industry publications like the Kelley Blue Book®.

Most charities will only accept cars that are at least in running order. Since they must pay for any repairs or expenses associated with donated cars once they gain possession of them, many charities cannot accept cars in dilapidated conditions. This is because the cost they would incur to repair them and prepare them for sale exceeds the price they are likely to get in return. This does not mean it has to be in great condition but it should at least be in running condition before they can benefit from it.

Why Many Charities Liquidate Donated Cars at Auctions

For charities, the benefits of car donations are obvious. They are able to derive significant income from donated vehicles and the process of receiving them and selling them can actually be quite simple. Many charities work with professional donation processing services for donations of large pieces of property. These services chaperone the vehicles from the donor to the auction without the charity having to expend much of their own limited resources--human or financial.

A donated car is usually liquidated at auction in this fashion because operating a vehicle carries so many expenses like fuel, repairs, and auto insurance. Charities usually have their own vehicles and can put the money from the sale of a donated car to better use than the car itself. Sometimes charities may have the need of a cargo van or some other such vehicle and in those cases (if the car is in excellent condition) they may keep it and operate it. (You would still get to take your deduction though.)

The technical aspects of donating an automobile involve you filling out and signing a few forms authorizing the donation and signing over the title to the charity in question. It is absolutely necessary to have the title and to sign it over to the charity in order to make the donation. You should also be certain of the transportation and processing company's reputability if the charity uses one. In return you should receive a formal letter and/or a receipt to hold for your taxes proving the validity of your deduction.

Consider Donating Something besides a Car on Its Last Legs

There is no reason you cannot donate a car with a high resale value and there are several reasons why you should. Cars from luxury car makers like Lexus, Acura, Mercedes Benz, and Cadillac (and any car that is in excellent condition and somewhat in demand) can yield far more financial benefit to charities. You will still be able to take the tax deduction (and a more substantial one at that) but the charity will see a much higher financial contribution after expenses.

Apart from cars, many charities can accept the donation of farm equipment, RVs, ATVs, mobile homes, boats, motorcycles, and even real estate. Such charities almost always work with donation processing companies because of the difficulty of transporting many of these items. The donation should still be in good running condition in order to be acceptable and profitable to the charity. All paperwork (including the title) should also still be in order and you should always receive a letter and/or receipt for tax purposes.