Giving a car to charity is not only for the cause closest to your heart but may also give you a good chance of getting a tax deduction. Are you in California and surrounded by an old car sitting idle in your driveway? Check out this guide for a seamless process on how to donate a car to charity effectively.
Why Donate a Car to Charity?
Multiple benefits an individual receives in donating a car to charity include:
Support a Good Cause: Your donation may significantly contribute to a charitable organization to utilise its proceeds for its programs.
Eliminate Clutter and Save Costs: You will be able to free up some space and also avoid all the costs associated with car insurance, repair, and registration that come along with a vehicle you may not need anymore.
Tax Deduction: For the donation to a qualified charity, you will likely get a tax deduction that lowers your taxable income of the year.
Step 1: Select the Right Charity
Before junking your old car you need to choose a car-worthy charity. Here’s what you need to know:
Verify Tax-Exempt Status: The charity must be a 501(c)(3) organization for this purpose. Check the organization via the IRS’s Exempt Organizations Select Check tool.
Use charity ratings websites like Charity Navigator or Guidestar to check the charity’s reputation, and ensure that a good majority of their proceeds goes towards their mission rather than shelling out for administrative cost. Make sure that your donation counts.
Popular Charities that Accept Car Donations in California: Some of the popular charities are Goodwill, The Salvation Army, Habitat for Humanity, Kars4Kids, and the Make-A-Wish Foundation. Each charity typically runs an effortless process of donating a car.
Step 2: Gather Your Paperwork
There is some paper work required to give away a car, but it is not as agonizing as one would assume. Make sure you have:
Title: It is your proof of ownership, and you will need it if you desire to donate the car to the charity. If you cannot locate your title, you can request a replacement copy from the California Department of Motor Vehicles.
Vehicle Information: Knowing the VIN, make, model, and mileage is helpful when calling the charity.
Transfer of Ownership and DMV Notification
After you have identified your charity, it is now the time to pass on the ownership of the car to it.
Sign Over the Title
The charity will guide you on how to fill it in on the transfer of the title. Ensure that you sign it properly to avoid miscommunication.
Complete a Notice of Transfer and Release of Liability: This form (REG 138) can be downloaded free on the California DMV’s website. The Notice of Transfer and Release of Liability lets the DMV know that you are no longer an owner of the vehicle, so you are protected if the automobile gets in some sort of accident or gets cited after you donate.
Step 4: Pick Up or Drop Off
Many charities will also come pick your car up free to you, making the process even easier. Normally they schedule a pickup at a time that suits you. You can also drop-off if you wish, based on what the charity prefers.
Step 5: Get a Receipt for Your Donation
Once you’ve donated the car, the charity will issue to you a receipt. You will find this receipt useful when you go for claiming your tax deduction:
Keep the First Receipt: This will be to prove that you made the donation and will contain details regarding the car, like its make and model.
Form 1098-C from the IRS: If the charity sells your car for over $500, the charity will mail you Form 1098-C from the IRS. The form will show what amount the charity sold your car for, which is the amount you can claim on your taxes.
Step 6: What Is My Tax Deduction?
The amount of your tax deduction will depend on what the charity does with the vehicle:
If the Charity Sells the Car: You can deduct the selling price of the car, which is usually what the charity will receive after selling the vehicle.
If the Charity Uses the Car: If the charity will be using the car for its operations-for example, if it is used to haul supplies-you might be able to claim a deduction for the fair market value of the vehicle. You can approximate the fair market value by such methods as the Kelley Blue Book.
Step 7: How to Take Your Tax Deduction
To actually claim the deduction, you will
You must use Form 1040 Schedule A to itemize your deductions. You won’t be able to claim this deduction if you chose the standard deduction.
Attach Form 1098-C if Credited: Attach Form 1098-C with your tax return if you sold your car for more than $500
Conclusion: Donate Your Car in California Easily
If you are donating a car to charity in California, it is rather straightforward, provided you take the proper steps in doing so. You will be supporting a cause you want to see thrive and have the added incentive of a tax deduction in case you qualify. By doing some legwork and filling out a little paperwork, you can make a significant difference in your community.