The advertisements have already started! As you know, Thanksgiving kicks off a string of shopping days promoting holiday spending. First there is Black Friday, followed by Cyber Monday. However, if all of that spending makes you want to give back to charity, then you have a great chance on Giving Tuesday. Giving Tuesday falls annually right after Cyber Monday, this year on December 3, and it is a day designed to encourage charitable giving. If you have car that you are no longer using and is worthless to you, why not consider donating it on Giving Tuesday? Here are 6 tips to help you navigate the road to donating a car and maximizing your tax deduction.
- Get organized: Before you even start the process, know that there will be some work on your end in determining the value of the car and transferring the vehicle to the charity. Write down the VIN #, take photos of the vehicle and gather any receipts that document upgrades that you’ve made, such as new brakes. Start a folder that will contain all information on your vehicle donation. Your accountant will thank you when tax season arrives!
- Pick a charity to support: Contact a few of your favorite charities to see if they accept car donations. They may have a procedure in place to simplify the donation process. Find out which of the non-profit’s programs will benefit from the donation or funds received from the sale of the car. If you’d like to take your research a step further, websites such as Charity Navigator specify and rank the financial history, transparency and other important details and expenses of thousands of organizations.
- Make sure that charity is a 501 (c) (3): In order for your car donation to qualify for a tax deduction, the non-profit you are supporting must be a registered 501 (c) (3) as recognized by the IRS. Simply ask for a copy of their letter of designation and ensure they will be able to give you the receipt for the donation. How much you will be able to deduct can get a little more complicated, but taking those first steps will confirm you have the paperwork you need to get started.
- Determine the non-profit’s plans for the vehicle: Find out whether they plan on selling the car or keeping it for their own use. If they plan on keeping the vehicle, you’ll usually see a larger tax deduction. If they sell your vehicle, you’ll want a receipt for the exact amount they sold it for to include in your tax returns.
- Take matters into your own hands: There are many companies that will assist you in the process of a car donation. However, in most cases, the more you (or the charity) do yourself, the more money will go to the charity. Many of the companies that facilitate the transaction will take a fee. If you do choose to use one of those companies, do due diligence on their history and costs.
- Protect yourself: Transfer the title of the car to protect yourself from future use of the car- including tickets and accidents. Also, you’ll want to make sure you are following all car donation requirements of your state’s DMV/RMV. Call them and ask for all the guidelines in a car donation. You’ll need to contact them in any case to inform them of the donation.
The IRS has a comprehensive guide to donating a car.
Please note this article is not meant to be interpreted as financial or tax advice and should not be used as so.