If you’re planning on getting a new set of wheels in 2012, why not donate your old car to charity? Sure, some of you might have reservations, but just think of the karmic benefits. Plus, you get a chance to do some good — and that can be a rewarding experience.

To help make donating your car easy, we’ve put together a handy list.

1. Explore the tax benefits

Getting a tax deduction for your car donation seems simple and straightforward, doesn’t it? But, when it comes to the IRS, things can get a little murky. If you’d like a tax deduction for donating your car, here are a few things you’ll need to consider:

  • To claim your tax benefit, you’ll need to itemize your deductions.
  • Your deductions cannot exceed 50 percent of your adjusted gross income.
  • If your deduction is for more than $500 (meaning your car is worth more than $500), you’ll need to attach an IRS Form 8283 to your tax return (as well as an independent appraisal if the vehicle is worth more than $5,000).

As with most tax-related issues, talking to your tax professional before you proceed is a good idea. That way there aren’t any surprises — of the tax-audit variety.

2. Determine the fair market value of your car

Kelly Blue Book or Edmunds.com can give you a pretty good idea of how much your car’s worth. Keep in mind, however, that significant damage to the car’s body or engine problems could put your car well below the fair market value (i.e., lemons don’t qualify for full blue book).

3. Make a short list of charity candidates

This is the fun part, where you decide which cause to support. To maximize your tax benefits, check out the IRS list of qualifying charities.*

4. Vet your charities before selecting one

Before you give your wheels to a charity, you probably want to know how it measures up.

The Better Business Bureau’s charity report website rates charities based on everything from how they govern themselves and spend their money to how willing they are to disclose basic info (you know, the whole transparency thing).

If you want to expand your research, Charity Navigator, another charity review site, has a wealth of info.

You can also ask your charity directly how it plans to use your donation, and request to see their recognition-of-exemption letter from the IRS. If the charity will use your car as part of its activities, you’ll be able to deduct the fair market value of your car. But if the charity just sells the car, you won’t be able to deduct the fair market value. Instead, you’ll most likely get a deduction for the amount the charity sells the car for (which could be well below fair market value).

Watch out for commercial fundraisers
Many companies take donations in the name of charities. And while they may sound good, these commercial fundraisers tend to keep a big chunk of the money you’re giving. For instance, in the state of Washington, 117 registered commercial fundraisers exist, but only 10 pass along over 80 percent of their earnings.

So if you can, deal with your chosen charity directly.

5. Contact the charity and arrange the transfer

Once you decide on a charity, you’ll have to figure out how to schedule delivery. Will the charity send someone to pick the car up or will you need to drop it off? (It’d probably be cheaper for the charity if you drop the car off.)

Always get a receipt
When you donate your car to the charity, make sure you get a receipt (what the IRS calls a written acknowledgement for contribution deduction). It should have:

  • Your name and taxpayer identification number
  • The charity’s name and the date of the contribution
  • The car’s VIN
  • A description of the vehicle and its fair market value (if it’s worth more than $500)
  • A statement regarding whether or not you received goods and services for your contribution (and their value)

If the charity sells your car, it’ll send you another notice of the sale and what it got for your ride (so you can deduct it on your taxes).

6. Re-title the car

Some charities will ask you to leave the ownership field blank on the donation papers. If you do this, it could leave you liable for parking tickets (gasp!) or other violations (if the charity doesn’t handle the title work properly).

The IRS recommends you take care of the title work through with your state’s DMV, leaving no room for error.

7. Take the car off your insurance policy

Once you’ve donated your car, you’ll need to get in touch with your insurer to have the car dropped from your policy. If you’re an Esurance customer, you can do this online or with a simple phone call.

8. Relax and pat yourself on the back

Yay. You did some good. How that’s for starting the year off right?

Related links

Vehicle donor’s guide (PDF)
The IRS’s guide through the car donation process, with a special emphasis on potential tax benefits.

Adding or removing a car from your policy
Visit the land of Esurance FAQs and learn about adding or removing a car from your policy.

*One small note: your chosen charity might not show up on this list if it’s a church, synagogue, temple, or mosque (as none of these have to apply with the IRS to be recognized for exemption).

If you want to talk to a real person, you can verify an organization’s status by calling the IRS Customer Account Services division. Ask to speak with someone in the Tax Exempt and Government Entities section. Their phone number is 1-877-829-5500.

For your car


about Shawn

With more than 4 years' experience, Shawn spent his Esurance tenure helping make car insurance info as accessible, engaging, and informative as possible while simultaneously managing an abundance of complex editorial spreadsheets.