Tips on Donating Cars

NOTE: Effective January 1, 2005, new IRS rules regarding the deductibility of car donations came into effect. If your claimed car donation is in excess of $500, please review the following IRS publications for information on the rule changes:

 The solicitation of used vehicles has become an increasingly popular means of raising funds, especially for local or regional organizations. On the surface, it seems like a win-win situation for the donor and the charity: a convenient and easy way of disposing of an unwanted car while helping a cause. Before handing over those keys, however, there are some things that you should know.

A radio, television or newspaper promotion that welcomes car donations may mention a charity name that sounds like an organization working in your community, but that may not be the case. In fact, it may actually be located many states away. If you are not familiar with the charity, its location, and its programs take the time to check it out to avoid being disappointed later.

In addition, since so many organizations now accept donated cars, with a few calls and a little research, you can probably find a group that closely matches the needs or charitable concerns you would most like to support. Don't confine your potential donated car recipients to the one or two charity promotions you recently heard in an advertisement.

Not long ago, only a handful of charities were known for accepting these types of donations. In recent years, these contribution requests seem to be everywhere. While this reflects the competition for the charitable dollar among a growing number of organizations, this growth is also due to the emergence of third-party brokers. These are for-profit firms that may sign up a number of different charity clients located in different parts of the country, solicit for donated cars on their behalf, sell and/or auction the cars, and then provide the charity with some portion of the dollars raised.

The donated car benefit to the charity can vary quite considerably depending on the arrangements. In some cases, the full amount of the donation goes to the organization if the charity sells the car itself or uses the vehicle to help fulfill some program services need (for example, delivering meals to homebound individuals). If a third-party broker is involved, however, the charity may receive only a percentage of the resale price of the car (such as less than 20%) or it may receive a portion of what is left after all the expenses have been paid by the broker, which can result in even smaller amounts going to the charitable cause.

In some situations, the amount the charity receives from a third-party broker has no relationship to the re-sale price of the used car. The organization may receive a flat fee (such as $100 per used vehicle) or a monthly agreed upon amount (such as $2,000 per month) that is not dependent on the total dollar value of sales incurred by the used car fund raising company. Finding out the nature of the charity's financial relationship to the resale of the car is important, since a flat fee situation may result in making your used car donation ineligible for a tax deduction.

In order to take a tax deduction for donating a car, boat or other vehicle, there are a number of other things you should keep in mind. First verify that the recipient organization is tax exempt as a charity under section 501(c)(3) of the Internal Revenue Code. To verify that a charity is eligible to receive contributions deductible as charitable gifts, you can do one or more of the following. See if the organization is listed in IRS Publication 78, the Cumulative List of Organizations, which is likely to be available at most large public libraries. Visit the online version of IRS Publication 78 at,,id=96136,00.html. Or, ask the organization for a copy of its tax exempt status determination letter. (Note that churches are not required to apply for exempt status, and may not have such a letter or be included in the mentioned IRS publication. A car donation to a church, however, would still be deductible.)

If the organization is a charity, you can deduct only the fair market value of your car donation. In other words, this is the price the car would sell for today in its current condition. If the used car is not in good condition and needs significant repairs, don't believe promotional promises that claim you will be able to get "top value" for your car donation based on one of the latest published guides that show the average regional prices for various used cars. If you are claiming that the car is worth $5,000 or more, you will need to get an official outside appraisal in order to substantiate the claimed value for the IRS.

Also, if you are claiming a car donation of $500 or above, you will need to complete and attach IRS Form 8283 to your tax return. For your records, you also will need proof that you made a charitable gift. The best evidence is to transfer the title of the car to the charity and keep a copy of this document. This title change also will help you avoid potential problems that can occur if the car is somehow parked illegally by the organization or is involved in an accident or other mishap before the charity is able to resell the vehicle.

Why all the fuss? For some households, a car donation may be the single largest charitable gift made during the year, or ever. This is all the more reason to make sure that the donation is being used for the greatest charitable benefit and that you can take full advantage of any potential tax deduction. The BBB Wise Giving Alliance welcomes readers to contact us about their experiences with car donations.

Vehicle Donation Checklist

  • Verify that the recipient organization is tax exempt as a charity.
  • Make sure the title of the car is transferred to the charity's name and keep a copy of this record.
  • Find out how the charity financially benefits from the resale of the car.
  • For tax records, take a photo of the car and keep copies of current classified ads or guide value estimates for similar vehicles. (For more deductibility information, get a copy of IRS Publication 561, Determining the Value of Donated Property.)
  • If the car is worth more than $5,000, get a written professional appraisal.
  • Check out the charity with the Better Business Bureau serving your area.
  • Find out if the charity is properly registered with the government agency in your state that regulates charities (usually a division of the state’s office of the attorney general).