- Find the right charity. Not all 501(c)(3) organizations take cars as a donation. Avoid the middleman, a for-profit company that facilitates car donations. Many of these companies are perfectly reputable, but remember they are in business to make money. Their agreement with the charity allows them to keep a percentage of the car's worth, sometimes as high as 50 percent. Look for a worthwhile charity that is willing to do all the work, and you can be assured it will keep all of the profits.
- Sign over the car correctly. The charity may ask you to keep your name on the title, but don't do this. You don't want to be libel for any costs down the road, such as parking tickets. If the car is still in your name, then the law sees it as your vehicle. You could also be libel if the car is involved in an accident or a crime. The back of your title has a place where you can sign to formally release your claim on the vehicle.
- It's crucial to value the car correctly. Previously, people were able to deduct the published fair market value of the car on their income tax return. Now, the IRS is taking a closer look at these deductions. The amount is determined after the charity sends you a receipt showing you what price the car received. If you value the car at $250 or less, you don't need the receipt. If the claim is greater than $500, you will have to file Form 8283 along with Form 1040 at tax time. If you say the deduction is more than $5,000, you must also include a written appraisal from a qualified appraiser. The appraisal must be done less than two months before you plan to donate the car. See IRS publication 4304 for more information on donating vehicles to charitable organizations.
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