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The Benefits of Car Donation

From getting a junk car out of your driveway to significant tax benefits, donating a vehicle offers a lot of benefits. We’ll cover the most important

Donating a vehicle to charity offers many benefits
Donating a vehicle to charity offers many benefits

Donating a vehicle to charity can offer a number of benefits:

  • You’ll get rid of a vehicle cluttering up your driveway
  • You’ll help a charity by providing a vehicle they can sell
  • If you follow the rules properly, you’ll shave some of your tax liability

It’s all fairly easy and straightforward, but you do want to understand the ins and outs of vehicle donation so that you’re receiving the maximum tax benefit, and donating to charities that are able to extract the maximum value from your donation without hidden fees. In this article, we’ll walk you through the process of vehicle donation and provide some solid examples of what you should expect, not only in terms of the process, but what kind of tax benefits you can expect to receive.

The Process

Donating a car is as easy as clicking on a website or picking up the phone.

It literally couldn’t be simpler. Once you contact a charity, they’ll make arrangements to either have you drive the vehicle to a central location, or they’ll pay a wrecker to come and pick it up from you. You’ll sign over the title and any other relevant paperwork, they’ll provide you a document for your taxes and -- as the British say (because a lot of British cars have found their way into the donation pile) -- “Bob’s your uncle.”

The more difficult part is figuring out which charity you’re going to donate to.

Determining a Worthy Charity

There are -- according to the National Center for Charitable Statistics -- 1.5 million non-profit charitable organizations in the United States. Not all of them accept vehicles for donation, of course, but many do, making the job of understanding where your donation is going and how much of your donation is actually going toward programs that help a real challenge.

The first thought for a lot of people is “Maybe I’ll donate it to an organization I’ve heard of.” Not a bad thought to start with, but not 100 percent of the time. There are a lot of organizations that millions of us have definitely heard of, but that aren’t exactly doing the best for the charities that they’re supposed to be helping.

For example, you’d want to know how much of the money generated from car donations was spent on overhead costs like rent, executive salaries and marketing. In one example, one of the more successful car donation programs provided $1.6 million in grants for needy children, which is terrific. But they also spent $1.7 million on advertising and promotion, more than the amount of the grant itself.

Thankfully, there’s an organization known as CharityWatch that helps to weed out the bad actors and provide solid information on better organizations. CharityWatch has a 60% “reasonableness benchmark” that they expect charities to adhere to, meaning that all of the costs, salaries and other expenditures required to generate grants should be less than 60% of the value of the donations. In other words, if a charity collected $100,000, at least $40,000 of that figure should go directly to the recipients.

The Car Talk Vehicle Donation Program returns 70% of gross donation proceeds to partner stations.
The Car Talk Vehicle Donation Program returns 70% of gross donation proceeds to partner stations.

With the Car Talk Vehicle Donation Program, you’ve got a lot of confidence regarding both concerns. First, you know Car Talk, because you’ve been listening to Tom and Ray Magliozzi on NPR since it was syndicated nationally in 1987. When Tom passed away in 2014, Ray and the rest of the Car Talk staff decided to expand and develop the Car Talk Vehicle Donation Program as a way to give back to the network that broadcast it into so many homes, cars and garages for more than 30 years.

The Car Talk Vehicle Donation Program is operated by life-long public radio fans and employees. And yes, there are costs that are associated with accepting vehicle donations. The Car Talk Vehicle Donation Program pays for towing, title transfer, auction or dismantling fees, and other costs associated with the program. Yet, the program is able to return a minimum of 70% of the gross proceeds to the NPR stations it supports, well above CharityWatch’s 60% threshold. Understanding the Rules

There is a bit of homework and paperwork on your side that will help you obtain the maximum possible tax benefit. In order to obtain the most significant tax benefit you should:

Itemize your tax return: This is key if a tax benefit is one of your reasons for donating. You must itemize your deductions to receive any tax benefit.

Understanding your Tax Bracket: The allowable tax benefit is based on which tax bracket you fall into. For example, if you’re in the 28% tax bracket and the car you donated has a value of $2,000, your donation has worked to reduce your taxable income by $560.

Does the Charity Qualify? The IRS requires that the charitable organization you’re donating your car to has to be a 501(3)c non-profit. The Car Talk Vehicle Donation Program works to process donated cars to the individual stations, which are all listed with the IRS as 501(3)c charitable organizations. You can use the IRS search tool to determine any organization’s charitable tax exempt status.

To receive the tax benefit for your donation, you must itemize your tax deductions.
To receive the tax benefit for your donation, you must itemize your tax deductions.

What is “Fair Market Value” and How Does It Affect Your Donation?

When you donate a car to a charitable organization, the IRS allows the deduction to equal the vehicle’s “Fair Market Value,” which the IRS defines as: "the price a willing buyer would pay and a willing seller would accept for the vehicle, when neither party is compelled to buy or sell and both parties have reasonable knowledge of the relevant facts."

When you donate your vehicle, the Car Talk Vehicle Donation Program will help you to determine its fair market value, and provide a receipt signifying your donation. It’s important to understand that if you’re looking at a third-party valuation service that provides average vehicle values that your comparing its value to a vehicle of the same year, make, model, trim level, mileage and -- most importantly -- condition than the one you’re donating. For example, a 2001 Pontiac Firebird with 300,000 miles, a blown transmission and two flat tires is going to be worth a lot less than a 2001 Pontiac Trans Am with 30,000 miles, a six-speed manual and a lifetime worth of maintenance records. If your vehicle is sold to a junkyard or auctioned, you’re allowed to claim the value that was paid for the vehicle.


There’s some paperwork to organize and complete before and after your donation.

Before you donate your car, you’ll want the title. If you don’t have that information handy, the customer service folks at 1-877-215-0227 can help. Usually, it requires filing for a lost title with your state’s Department of Motor Vehicles, but if your vehicle is older than 25 years old in many states, a title isn’t required.

If your car sells for less than $500 you can take a tax deduction equal to the ‘fair market value’ of your donation up to $500. Fair Market Value is explained as the “Blue Book” or “Guide Book” value of your vehicle. If your vehicle sells for more than $500, you may deduct the full selling price. Call in and provide a social security number, and we will produce and send the 1098-C from.

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