BusinessFinding a JobFrugal LivingIndustriesInsurancePersonal FinanceReal EstateScams & FraudSelf-EmploymentStarting a Business

Car Donation to Charity: Pros and Cons

Updated on May 6, 2016
The tax deduction provided by your car donation to a reputable charity may be substantial.
The tax deduction provided by your car donation to a reputable charity may be substantial. | Source

Your Car Donation Could Help Someone in Need and Provide a Tax Break for You

When my accountant asked me if I would donate my car to a local charitable organization, I was hesitant. First of all, I didn't know much about car donation.

My accountant explained that not only could I get a decent tax deduction, but my unwanted car could provide an opportunity to help a family take more control of their own lives and maybe even help lift them out of a life of financial poverty. Thinking my car could do that made me feel pretty good inside.

Also, I would be getting rid of a broken down car that I really didn't want or need. As a matter of fact, one particular car in our driveway right now needs a rebuilt transmission and will cost me cost several thousand dollars to repair it.

That's money I am really not willing or able to spend at this time. Not to mention the registration, inspection and other fees I'll have to pay on it in the coming months. I don't think I could even get a decent trade-in amount - even if the dealer would take it.

Car donation provides a way for me to get rid of my vehicle at no cost, get a tax deduction and help someone in need. Sounds like a good deal to me. So, you will want to consult your accountant and a deserving local charity to get all the details for yourself.

For now, let's take a look at just a few of the good and bad things about donating a car to charity.

Pros and Cons of Car Donation

Donate your car and provide someone with a fresh start on a new life.
Donate your car and provide someone with a fresh start on a new life. | Source

PRO: Donate Car and Provide a Fresh Start

Over the years since that first suggestion to donate my car to charity, I have made several auto donations and seen the positive results in people's lives. A donated vehicle can give someone or some family a fresh start and a new lease on life.

For some, the donation has provided a way for them to get to work. For others, a car donation has allowed families to do more in their daily lives.

An additional vehicle may provide transportation to and from school in inclement weather for a family's young children or provide a reliable vehicle that allows a husband or wife to get to work without relying on public transportation.

Sometimes the proceeds from the sale of a car donation can help people as well.

Some charitable organizations will even take wrecked or junk car donation. Be sure to check with local charities to see what vehicles are acceptable.
Some charitable organizations will even take wrecked or junk car donation. Be sure to check with local charities to see what vehicles are acceptable. | Source

PRO: Car Donation Gets Rid of an Unwanted Vehicle

Getting rid of a car that you cannot sell or you can't sell for much cash is not as easy as it sounds. Maybe your car is worth less than the amount it will cost to repair it or it just doesn't have a trade-in value.

Or perhaps you have an old collectible car that is just too expensive to keep - maybe it uses too much gas, requires expensive repair or it just takes up too much of your time to keep it running.

Some charities will even accept wrecked or junk cars as donations if there is any value in the vehicle.

Even if a car sits unused in your driveway, you may still have to pay extra taxes, fees or other expenses. Car donation helps you get rid of something you don't want or that is costing you money. Donating your car gets rid of an unwanted vehicle, gets you a tax break and provides a way for you to help those in need - a true win-win situation.

If you donate your car, you'll need to file the appropriate tax forms.
If you donate your car, you'll need to file the appropriate tax forms. | Source

PRO: Car Donation and Tax Advantages

For the most part, car donations are tax dedcutible. Once you determine the fair market value of a car before it is donated to charity, you should be able to deduct that amount for charitable purposes. As always, check with your accountant or tax professional before making any decisions on donating your car.

In the U.S., if the amount of a deduction for a car donation exceeds $500 (US), you'll need to file IRS Form 8283: Non-cash Charitable Contributions along with your usual itemized tax return. Mail a copy of this completed form to the charity as well. The charity is required to verify your car donation by filing the IRS Form 8282: Donee Information Return and provide you with a copy.

CON: Paperwork and Car Donation

While a car donation will get rid of that unwanted vehicle, it's not as easy as just dropping off your vehicle and tossing the keys to some charity volunteer. The paperwork involved can be daunting and tedious. As the owner, you must take responsibility to transfer the title and provide all required accurate information about the car.

If you have lost the title to your car, you will be responsible for getting a new title before you can donate a car. It is also your responsibility to provide, fill out and file all appropriate tax forms. Other information you will need is the fair market value of the vehicle. For some folks, the amount of paperwork necessary to donate your car is just too much of a bother.

A simple car donation may not put cash in hand immediately, but it may pay off in a future tax deduction.
A simple car donation may not put cash in hand immediately, but it may pay off in a future tax deduction. | Source

CON: Selling Your Car Vs Car Donation

You may sell your unwanted, used car and will likely put some cash in your pocket, however, if you donate your car then you're not going to be able to put any cash in your pocket.

True, you will likely benefit from the tax deduction but that is not fast cash on hand. It may be more beneficial to you if you just sell the car for cash. Check with your accountant or other tax professional to determine what works best for your situation.

Must-Watch Video - Before You Donate Your Car

One Last Bit of Advice Regarding Car Donation

Be careful because there are, unfortunately, a lot of so-called "charities" out there that are running a scam for car donations. Some criminals run these organized charity scams to get free cars to sell as junk or to have fixed up and sold at a local used car dealership. Other scam organizations only give a small amount (5-10%) of the value of the car to charity. Either way they are making money and leaving you holding the tax bag.

Here's the zinger - when you try to deduct the fair market value or your donated car on your tax return, you will not only lose the tax deduction, you'll also likely be audited. The bottom line is be careful, check out charitable organizations you're considering and get professional help from your accountant or other tax professional.

This article is intended for information purposes only and not intended to serve as legal or tax advice.

Take a Minute to Answer a Question...

Have you ever donated a vehicle to charity?

See results

Comments

    0 of 8192 characters used
    Post Comment

    • billybuc profile image

      Bill Holland 4 years ago from Olympia, WA

      Good job of covering this topic. It is happening more and more these days, and you provide a good look at the pros and cons of the subject.

    • MKayo profile image
      Author

      MKayo 4 years ago from Texas

      Thanks for the read and compliment BB - and I agree with you - happening much more with this tight economy.

    • Al Bacon profile image

      Al Bacon 4 years ago from Fraser, Michigan

      Good topic! I might add that often a local better business bureau can give you some idea of the reputation of who you are considering donating a car to.

      Sometimes if you look at all of those you might donate the car to you may find you prefer to help one as opposed to others. I have never had a car to donate but if I were to donate a car which ran, I would prefer it go to a domestic violence shelter where someone abused left with only the clothes they were wearing at the time.

    • MKayo profile image
      Author

      MKayo 4 years ago from Texas

      Thanks for these additional helpful tips, Al - I appreciate the read and compliment.

    • VirginiaLynne profile image

      Virginia Kearney 4 years ago from United States

      We donated one of our cars to charity when we realized that we were going to have to fix the air conditioning in order to sell it. Donating gave us more money than selling . Great hub and very informative on pros and cons!

    • MKayo profile image
      Author

      MKayo 4 years ago from Texas

      Thanks VirginiaLynne!

    • tipstoretireearly profile image

      tipstoretireearly 4 years ago from New York

      Nice tips for how to donate a car. The heightened scrutiny from the IRS over the last few years makes it a little more difficult to get the paperwork in place. But it is still a good way to clear out your driveway while also helping a family in need.

    • MKayo profile image
      Author

      MKayo 4 years ago from Texas

      Tipstoretireearly - thanks for the read and comment.

    • Kristen Howe profile image

      Kristen Howe 14 months ago from Northeast Ohio

      Great hub. This is so informative and interesting to know the pros and cons of it. When my mother died two years ago, my brother and I considered donating her car, when a fellow neighbor suggested it to us. But we've decided to pass and let the tow truck take it away and dispense with it. It would've been a struggle to get her title into escrow and such. Congrats on HOTD!

    • VirginiaLynne profile image

      Virginia Kearney 14 months ago from United States

      We once decided to donate a truck to charity after finding out that the cost of fixing the air conditioning was about what we would make on the sale. The charity was a food pantry center and needed our truck. The tax write-off was more helpful to us than the sale and so it really was a win-win. Great idea of how a person can help a non-profit and also help themselves. My students write research essays evaluating non-profits and what really helps them the most. I'll have to remember to talk about donating large items like this.

    Click to Rate This Article