BBB Tip: How to donate a car to charity

Thinking of donating a car to charity? There are many things you should consider before you make the donation. BBB offers information and guidance so you can feel confident when you donate a car to a charitable organization.

1. Verify that the recipient organization is tax-exempt as a charity (Check with the IRS in the U.S. or the CRA in Canada) or ask the organization for a copy of its tax-exempt status determination letter. In the U.S., churches are not required to apply for tax-exempt status and may not have such a letter or be included in the IRS site above. A car donation to a church, however, would still be deductible.
   
   
2. Check out the charity that’s soliciting or is advertised as the one your donation will benefit. Contact it directly, or go to its website. The names of well-known charities are sometimes used without permission, and the named groups may not benefit.
   
   
3. See if the charity is registered with the government agency in your state that regulates charities (usually a division of the office of the state’s attorney general). Find the relevant office in your state. In Canada, check with Donate a Car Canada.
   
   
4. Understand deductibility details. Most cars donated to charity are sold at auction, and the donor’s tax deduction is limited to the gross proceeds from the sale. The charity must provide that amount to the donor in writing. Donors can claim the car’s full fair market value only in certain conditions, such as when a charity uses a car in its program or gives it to needy individuals.
   
   
5. Ask how much goes to the charity. The amount a charity receives for an auctioned car varies according to its arrangement with the company hired to handle the collection and sale. It may be a percentage of the sale or a fixed amount per vehicle.
   
   
6. Check IRS and CRA guidelines  In the U.S., check A Donor’s Guide to Car Donations (Publication 4303) or call (800) 829-3676. If you are claiming a car donation of over $500, you will need to complete and attach IRS Form 8283 to your tax return. If the car is worth more than $5,000, you will need a written professional appraisal. In Canada, check with Donate a Car Canada.
   
   
7. Transfer the car’s title to the charity’s name and keep a copy of this record. The title change will help you avoid potential problems if the car is somehow parked illegally by the organization or is involved in an accident or other mishap before the charity sells it.
   
   
8. Read BBB Wise Giving Alliance's guidance on car donations.

For more information, visit BBB.org's resources for charities and donors and giving tips.

BBB of Metro NY contributed to this article.