Your old car, the one you're currently trying to sell, could be very helpful for a charity that needs extra transportation options. If opting for a vehicle donation sounds like a good idea, you'll find the process very easy. However, it's not a matter of just bringing the car over and signing a form. Once you hand over the keys, you have to be aware of what to do next, and what might happen to the car.
You May Still Have Motor Vehicle Paperwork
Your motor vehicle department may require you to fill out additional forms that state you've donated the car and that it is no longer your responsibility. Do this immediately. If you don't, and the car is involved in an accident or gets a ticket, you could be held responsible even if the charity notified the motor vehicle department itself. Avoid confusion by filling out all the required paperwork as soon as you can.
It Might Be Sold
You might think your car will become a fleet vehicle for the charity, but that's not always the case. Sometimes the best use of the vehicle for the charity is to make money by selling the vehicle. Be aware of this because it not only means that the car might end up in a situation you didn't intend, but it could also affect your tax deduction for the car.
If you want to be sure your vehicle will be used by the charity as transportation, find a charity that will only use it that way. Otherwise, if you are going to donate your car to a charity, you should be OK with the idea of your car being sold to a private party after you donate it.
As for the tax deduction, if your car is sold instead of used, you may end up having to take a lower tax deduction. If the car sells for a lower price than you estimated it was worth when you donated it, you'll have to deduct the lower sale price, rather than the actual value of the car.
Of course, it is possible that the charity will use the car for a time and then sell it. In that case, you could deduct the value of the car instead of the lower sale price. However, you'd have to speak with an accountant to be sure the car was used long enough to qualify the car for a full deduction.
You Need a Specific Tax Form
You'll also need to be on the lookout for an IRS form 1098-C if the value of the vehicle was over $500. This details your vehicle contributions to the charity. The charity completes the form and files it with the IRS. If the vehicle value was under $500, you'll have to verify with the charity regarding how much the car was used or sold for. Keep all paperwork from the donation with your tax records.
Donating a vehicle can be a very good move as long as you are aware of what to do and what might happen. Contact the charity of your choice to discuss donation -- the charity should have a section with information about this on its website, too -- and see if your car could be of some use.