A classic car donation should be a simple process, but in many cases, it is not. This is mostly due to many donors of classic cars not understanding that the donation process is not always as easy as advertised. There are potential scams, serious tax issues, amongst other pitfalls that can make the whole experience seem both financially and morally worthless. Protect your charitable gift by arming yourself with the crucial information about classic car donation to ensure that what you give is used in the best way possible.
Repairs and Safety
When you donate a classic car with Collectibles With Causes, or any other reputable charity, you will find it is very different from more traditional types of car gifting in that the value of antique automobiles is usually much higher than a modern gifted vehicle. Although, this also means that there are often issues with both safety and repairs that some donors will look into repairing before making a car donation. Others may prefer to donate their classic car as-is, even if it is not road worthy. There are lots of great charities that will cater to both types of donors.
There are some legal experts who will recommend that donors take all steps necessary to professionally correct any potential safety issues that could cause problems “down the road.” There are some donors who will work with an attorney to have a document drafted that transfers these issues, along with the task of mitigating them, to the receiving party. It can be a small price to pay for peace of mind.
Find a Legitimate Charity to Support
You must always remember to perform your due diligence when it comes to selecting a reputable charitable organization. There are hundreds of stories from around the country of cars being gifted to charities that are not approved by the IRS. This means that the donor will not be able to claim the fair market value of the vehicle as a tax deduction.
Worse still are the cases where donations have been made to groups that pose as charities but actually sell the donated vehicles to keep the cash for profits.
To alleviate some of these concerns, ask for documentation or EIN number ( a nine-digit tax number that IRS assigns to nonprofits, charities, organizations, and business) to prove the charity’s status. If you’d feel more comfortable doing your research discreetly, you can confirm a charitable organization’s status online through the Better Business Bureau, GuideStar, or Charity Navigator.
Deal Directly with the Charity
Advertisements for car donation services are actually paid for by groups that intercede in the donation process to make a profit. As a middleman, these types of groups do little more than make the arrangements between a donor and a charity and take a large portion of the gift for themselves.
Consequently, it is important to work directly with the charity whose work you would like to support. This is the only way to absolutely ensure that the maximum value of your donation goes to support the cause you have chosen.
Delivering the Classic Car
While tax benefits are a common reason mentioned for donating a classic car, for most donors, it is about the philanthropic work. If your primary aim is to maximize the value for the charity, you should ask about the possibility of delivering your classic car donation directly to the charity. Otherwise, the organization is often forced to pay for transport costs that will ultimately reduce the value of your donation.
Transfer of Ownership
This is one of the most critical parts of the donation process. You have to ensure that a transfer of ownership occurs when you make your donation. If the vehicle is not transferred over correctly, you may be held responsible for any liabilities the car presents once it leaves your care. This includes everything from parking tickets and related citations to the possibility of trouble should the car be involved in an accident or crime.
General Car Donation Tax Rules
Everyone’s tax situation is different, but the following critical points concerning tax rules and donating a classic car covers just about everyone:
- Ensure the charity is a 501 ©(3) nonprofit organization.
- If the charity sells your car, it must send you the IRS form 1098 C within 30 days. This form will indicate how much the organization received for the sale of your donated vehicle.
- If the fair market value of your donation happens to be more than $500, you will also need to file IRS form 8283.
- If the fair market value of the classic car is more than $5,000, an independent professional appraisal will be required to file for a tax credit.
- If the car sells for less than $500 but has a fair market value of at least that, you may still be able to earn the full credit.
- In order to get the credit for your donation on the current year's tax return, you must donate your car by 12/31.
Rules Regarding Use of Your Classic Automobile Donation
Your charitable tax deduction will be directly affected by the way a charity utilizes your car donation. Charitable groups may also use donated cars for their own transportation needs, for an attraction, for fundraisers, for other types of events, or they may also give the car away to an individual in need.
Most donors still qualify for a full tax deduction if they are able to show sufficient evidence of this type of use. It is important to talk with your charity of choice to find out how they will use the vehicle before you execute your plan to donate a classic car. The IRS has a helpful pamphlet outlining the rules regarding car donations and what is expected of donors. It is worth taking a look at if you are planning to make a classic car donation.
Donating a classic car to charity is a powerful way to benefit those in need while gaining a tax deduction. Be cautious, if not gifted correctly, your philanthropic actions may potentially cause more trouble than they are worth. To be completely certain you go about making a charitable donation in the best way possible, consider talking to a trusted attorney or tax advisor (or both) before you donate a classic car, vintage muscle car, antique motorcycle, old truck, or another collectible automobile to charity.
