Do you have a used car just sitting in your driveway and collecting dust? Do you want to give to a good cause? While these two questions may seem unrelated, donating your used car to a charity can save you money at tax time. Even better, your donation can do some good in your community.

Before you head out to donate your car in Massachusetts, there are some items to consider. By following these tips, you can be better prepared for giving your car to charity the right way.

How will the donation be used?

When searching for an organization, you should find out how the car will be used. For situations where the vehicle will be used by the charity or given to a person in need, the tax deduction will be based on the fair market value of your car. If they decide to sell the car instead, the deduction amount will be based on the amount they receive after the sale.

In the case of selling the car, many organizations may team up with a third party to handle the sale. These businesses will manage the sale of the vehicle and even pick up the car in some cases. You should ask to know what percentage the charitable organization will receive to see if the donation would help them.

Check the tax status of the organization

To receive a tax deduction for your donation, the organization has to be registered as a 501(c)(3) organization/nonprofit.* Instances where they don’t have to register as a nonprofit include governments, churches, mosques, synagogues, and temples. For other nonprofit organizations in Massachusetts, you can contact the Public Charities Division or the IRS Tax Exempt/Government Entities department.

Document your vehicle

How much is your car worth? In general, if your vehicle is worth more than $5,000, you need to have the vehicle appraised by an independent appraiser. Get this value in writing and make sure to fill out IRS Form 8283 at tax time.

Once you donate your vehicle to a charitable organization, have them provide a written acknowledgment of the donation and a receipt as well. If they sell the car, you should also receive a receipt for the sale. Having more documentation at tax time can save on headaches later if you’re audited.

For vehicles valued below $5,000, you can determine the value using sources like Kelley Blue Book, National Auto Dealers Association guide, or the Hearst Black Book. A word of caution with this method–you will want to ensure that you’re accurately using the mileage, condition, and date of purchase for your vehicle. You should also take photographs of the odometer and car for extra documentation.

What other information should you gather? In addition to the previous information, you should keep a record of the name and address of the organization, along with recording when your vehicle was picked up. You should also have records of when and how you obtained your vehicle backed up by documents such as your title, registration, and receipt copies.

What can be donated?

Massachusetts has an active boating community, and some charities will accept your boat as a donation. Other vehicles can include RVs and motorcycles as well. If you have a broken down car, some charities will take those as well to either fix them up or sell them for parts to help benefit the organization’s mission.

While many charitable organizations offer free pickup services for your vehicle, it can often reduce the amount of donation they receive. If they will let you, and the car is operational, you can offer to drive it to them and drop it off to help them benefit more from your donation.

Finding the right charitable organization

How do you find the right charities to donate to? You can either start your search online or by contacting your local organizations. Ask them questions so that you can find the best fit for your donation. Many charities will be happy to talk about their group’s mission and how your donation can help them with their program. Some may even send you additional information so that you can make an informed decision.

Many for-profit websites and businesses offer to take your used vehicle and transfer the proceeds to your chosen organization. While many of these are reputable businesses, adding in a third party will lessen the benefit to charities. These businesses will generally deduct their costs for picking up your vehicle and processing the sale then will give a percentage to the charities. The process is relatively simple and straightforward, but you are generally better off contacting the charitable organization directly to help maximize your donation.

Donating your vehicle

Once you’ve located the right organization, you’ll want to sign over the title to them. This releases you from being liable for the donated car. If the vehicle was produced before 1980, Massachusetts doesn’t require you to have the title.

Talk with the organization to see who should be listed in the “buyers” section of the title. In most cases, this will be the organization’s name or the name of the third party agent.

Once the transfer is complete and you’ve received all of your documentation, all that’s left is tax time. You can feel better that you’ve helped out a charitable organization while getting rid of unwanted vehicles from your house at the same time.

There are so many people in California who have old or damaged cars that they are not using and want to find places where they can donate them. Are you someone considering donating your car to a charity in California? Donating your car to a charity in California can be a wonderful decision for several reasons. Some of the cars which are donated can be recycled and used as emergency vehicles while others are sold away. The funds from the sales of these cars can be used to help any cause in the state of California. Here are some of the many benefits of donating your car:

• The car that you donate may be able to assist a great cause
• It can be a wonderful way to remove your old car from your property without having to pay anything
• You will also be able to claim the donation of your car as a tax deduction
• Regardless of the condition, make, or model of your car, the charitable organization will be able to accept your car and make some good use of it (sometimes unusable cars will be auctioned off or sold for parts)

What do I need before I can donate my car?

When you donate your car to charity you will receive a tax break, which is based on the value of your car. However, before you donate your car in California, there are some things that you must consider. Some of them, which specifically relate to the car donations in California are:

• You must have the title of your car before you consider donating it (you will be required to hand this document over to the organization).
• With your title in hand, start looking for an organization in California that you think would be the best recipient for your vehicle and find out if they accept car donations. You should verify that the charity is properly registered as a 501(c)(3) organization (per IRS standards) by confirming with the organization and/or the IRS. Also, find out if the organization you are giving your car to is the charity itself or a broker. If possible, avoid giving your car to a broker since they will liquidate your car and give you credit for only a portion of what the charity receives from the sale.

What steps do I follow to go through the donation process?

To donate your car in California, start by contacting the charitable organization that you wish to donate your car to. In case you would like to claim your car donation as a tax deduction, you have to confirm that the charity is recognized by the IRS as a non-profit organization (a 501(c)(3), as mentioned above).

The process for receiving the tax receipt for your donation may vary depending on the organization’s terms and conditions. Some charities will have the towing service give you the receipt when they are picking up your car while others will email you the initial receipt. This receipt will enable you to claim the tax deduction of an assigned amount, not more than $500. It is strongly recommended that you research and understand how the charity you are making your donation to handles this process before you consider making your donation.

In case your car qualifies for fair market value or sells for more than $500, you will be eligible to claim an increased tax deduction after the sale of the car takes place. The amount of money that you will be allowed to deduct when filing your tax return can vary depending on some factors such as the prices for which the car is sold.

Is there anything else to worry about?

In California, the license plates will remain with the car; therefore they should not be removed before the charity picks up the car from your property.

Another important step that you must not miss when donating your car is filing the release of liability at the California Department of Motor Vehicles. This document will release you from any kind of liability which may arise in the future, after the car has been donated. To complete this process, complete Form REG 138 and submit it or the pink portion of the car title to the local Department of Motor Vehicles. If you are unable to do this, you can also file online for the release of your liability at http://www.dmv.ca.gov. Do not wait too long if you opt to take care of this process after-the-fact.

If you’ve got a car that you don’t use but would like to get some money for, donating your car to a charity may be a wise choice. By donating your car you can deduct an amount from your taxes based on the price at which the car sold. Be careful though or there are a few traps that could catch you unaware. If you learn the guidelines set forth by the IRS you will be able to maximize the deduction you can claim from your car donation.

How will this factor into my taxes?

You can find more details about the IRS’s guidelines for donating vehicles by reading IRS Publication 4303. Here’s the gist of what you need to know. First of all find a charity that you would like to donate to and make sure that it is a section 501(c)(3) organization and is accepting car donations. Next figure out the value of your vehicle and keep the appropriate documentation on hand to prove it.

Figure out how much you can deduct

When itemizing your donation on your 1040 income tax form you should state your estimate for your car’s value for deduction. Keep in mind that if the charity is planning on selling your donated car then the amount you’ll actually be able to deduct will be determined by the gross proceeds received by the charity. They will provide you with a receipt which you must provide to the IRS along with a few other pieces of documentation specified in the IRS publication above.

If on the other hand the charity makes significant use of the car or sells it for a lower price to a needy person, you may deduct the fair market value of your car from your taxes. For deductions up to $500 you must provide basic information such as the name of the charity, the date of your donation, the location where you donated the car, and a description of your car.

If the value of the car you have donated is between $500 and $5,000, you will also need to fill out Form 8283, Section A. And if the value is greater than $5,000 you will need to fill out Form 8283, Section B instead and obtain a written appraisal from a qualified appraiser.

Documentation is your best friend

It’s highly recommended that you collect all the necessary documentation as asked for by the IRS. You could be prevented from deducting more than $500 for your $4,000 car if you don’t provide Form 8283, Section A. Do your research before donating to a charity. You don’t want to donate a car you’re expecting $500 for only for them to sell the car through a middleman for a fraction of the price. Ideally you would like to know that the charity will either use your car in its operations or provide it to someone needy so you can deduct the full fair market value!

Old cars can be a hassle to get rid of. But as long as you find the right charity to donate to, you can get some extra cash in your pocket and help a good cause!