How You Can Benefit from Car Donation

I’m sure there are some people out there - perhaps you’re one of them - considering taking the government up on their offer to trade in your old beater for a screamin’ deal on a new car.

I don’t think you should do it. Frankly, I think the auto industry has benefited enough from government help. I mean Chrysler should be out of business today, and GM would probably be in liquidation phase right now if the White House had never stepped in and saved their butts.

This Cash for Clunkers thing isn’t about saving the environment. If it was, the program would accept vehicles built prior to 1984. Don’t be fooled by anyone - the CfC program is a front to throw more money at the automakers, and it’s working.

Think about it: Say you have a 2000 Ford F-150. With a combined fuel efficiency rating of 15 mpg, the vehicle qualifies as a clunker and is eligible for a $4,500 credit on a new 2009 Ford Focus. The F-150’s trade-in value is about $3,600 anyway, so really you’re only getting $900 extra toward the price of the Focus. If you need to get rid of your truck, why would you trade it in to benefit the automakers? The truck is certainly not a clunker and could benefit someone through donation.

I spoke with Pete Palmer, co-founder of the Vehicle Donation Processing Center, to clear up some confusion and misconceptions about donating cars. Here’s what he said when asked about donating a car rather than selling or trading it:

A car donation can be a great decision for anyone who wants to help people through supporting a non-profit organization. Charities need all the help they can get these days, and a vehicle donation can make a big difference in their ability to provide services. Car donations are also a great alternative for folks who want to avoid all the hassle, wasted time, and expense of selling a car. Car donation offers fast and free pick-up of your vehicle - plus you get a nice tax deduction.

Donating a car today isn’t as easy to write off as it was prior to 2005, though, when donors could deduct the vehicle’s entire fair market value. That’s when Congress stepped in and limited the deduction to $500, or whatever amount the charity was able to sell the vehicle for. Needless to say, car donations tanked.

Today, Mr. Palmer’s organization is part of a group supporting a new House Resolution that would, according to him,

allow car donors to take a write-off at fair market value up to $2,500 and an appraisal after that. This would eliminate the delay in donors knowing what their deduction would be and save a lot of paperwork for the charities. Proponents of the bill feel that since almost all other charitable donations are eligible for a deduction at fair market value, car donors should also get the fair market value when they donate a car.

Car donation can be a fast and easy way to get rid of an unneeded car, and you can feel good about your gift rather than feeding the auto industry’s returning greed. If there are charities you would like to support in your community, a good way to start would be finding them on VDPC’s charity search page.

One final word from Mr. Palmer:

The value of car donations to charities is not small potatoes. Our company alone has sent checks to charities totaling over $60 million - that’s net after all the towing type costs have been deducted. Auto donation is a terrific program for the non-profits and for all the people who find themselves with a car they don’t need and they’ve figured out that the amount they could get for selling it isn’t worth the trouble.

Car donation and how to locate your local depot

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The 3 Requirements For Getting a Tax Deduction When You Donate a Car

If you've donated a car, you may qualify for an IRS deduction. There are three simple requirements that must be met to qualify for a tax deduction:
1) Deductions for donating a car must be itemized in your tax return. Use Schedule A of your 1040 tax form for your deductions and be sure to include information about the donated car. Remember that your deductions cannot be more than half of your adjusted gross income.
2) The charity that you've donated your car to must be eligible to receive your cash or non-cash donations. The best thing to do is visit the IRS website for the online version of Publication 78 -- "The Cumulative List of Organizations". You will find a comprehensive list of IRS recognized 501c3 organizations there.
It's highly recommended that you check the 501c3 status of the charity before you donate a car. Don't just assume that a charity is qualified just because they've said so. You can also call the IRS Division for Tax Exempt and Government Entities.
Anyone has the right to request documentation from the charity. You can request the charity provide you with a copy of their application for tax-exempt status, their determination letter and their most recent annual returns. While the charity can't charge you for this information, take note that they do have the right to charge money for making copies and any postage or shipping fees.
3) A car cannot be owned with the primary purpose of profiting from it. This means that car dealerships cannot get a tax deduction from donating a car to charity.
Planning on donating your car just for the tax deduction? Know the new rules!
The rules have changed with it comes to tax deductions for donating a car. Prior to 2005, you could donate a car to charity and claim the fair market value -- the actual sales price -- of the donated car as your tax deduction.
Now, whenever you donate your car, you'll be able to deduct no more than the amount that the donated car earned at the charity's auction, or $500, whichever amount is less. The standard amount that a donated car pulls in at auction is between $200 and $500. So, even if your donated car pulls in $600 at auction, your deduction can be no more than $500.
There are only two ways that you can still qualify for an IRS deduction based on the fair market value of the car donated.
The charity that you've donated your car to must prepare a statement that they intend to use the donated car for a specific purpose that is thoroughly explained. The charity can also state that they intend to give the donated car to an individual in need. The charity has the right to sell the donated car to a needy individual but the sales price must be well below market value.
The charity can also present you with a statement of their intent to make significant improvements to your donated used car. The explanation as to what these improvements are should be detailed and precise. There should also be a promise from the charity that they will not sell your donated vehicle until these improvements are completed.
Such statements or letters must also include your name, taxpayer ID, the VIN (Vehicle Identification Number) and the date that you donated your car. The charity also has permission to use Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, in lieu of the statement or letter.
The charity will also provide you with an acknowledgment of your donation, typically as Form 8283 -- Non-cash Charitable Contributions. The charity should have this acknowledgement to you within thirty days of your car donation and it's advisable to attach Form 8283 to your tax return.

Volunteers Of America

Volunteers of America is a popular charity that accepts car donations. I have worked them firsthand and found the experience to be seamless. Volunteers of America is a comprehensive human service organization. They serve at-risk youth, elderly, homeless, people with disabilities and also those who are recovering from addictions.


They have an easy online donation form to fill out and they will contact you to schedule a pickup. Along with cars, they accept, boats, trucks and RVs.