Donating your car can benefit a charity and your tax return. To maximize the benefit for the charity and for yourself, keep these things in mind:
•Make sure you’re donating to a 501(c)(3) charitable organization if you want a tax deduction. You can look up the charity by searching its name on the Exempt Organizations Select Check at irs.gov or by calling 877-829-5500. You can look up the group’s tax filing at guidestar.org.
You get the tax benefit only if you itemize expenses on your return. Although there are exceptions, the amount of the allowed tax deduction is usually equal to the amount the charity gets when it sells the vehicle.
The exceptions might allow you to deduct the fair market value of the car, which will often be higher than the sale price. Those exceptions apply if the charity uses the car itself, makes substantial repairs before selling the vehicle or sells it to a needy individual for a discount. Keep any documentation that verifies the allowed exceptions.
Avoid liability by signing over the registration to the charity yourself. That way you’re sure the car won’t remain in your name, which could leave you on the hook with the DMV for fees or even with law enforcement if the car is later used in a crime.
Ask to see the agreement the charity has with the for-profit company that collects and sells vehicles on its behalf. If the charity gets less than half the proceeds, you could be dealing with an inefficiently run program, Charity Navigator President Daniel Borochoff said.