What Happens to Donated Cars?

What a charity chooses to do with your ride can affect your tax deduction.

Charity organization accepts donated carShutterstock

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Many charitable organizations advertise that they will take in your unwanted car or truck and hand over a tax deduction in return. What you might not know is that the deduction is linked to what the charity ends up doing with your vehicle.

Here's what happens to donated cars — how most charities handle them, how they make use of the vehicles, and how that affects your tax return with the Internal Revenue Service (IRS).

Will My Car Be Picked Up?

Some charities will show up at your house and pick up your car, whether it's drivable or needs to be winched onto a flatbed. You should verify ahead of time as to whether the organization you are donating to requires a drop-off, or whether they offer a pickup service.

It’s important that you make a note of the time and place of the hand-off, and get a receipt, in order to prove to the IRS that the donation occurred. Taking a photograph (or several) of the vehicle to document its condition will also be helpful should questions of its fair market value come into play at tax time.

What Will a Charity Do With My Donated Car?

What happens to a donated vehicle depends entirely on how the charity makes use of it, and its overall condition.

Some organizations will accept vehicles no matter what shape the cars are in, as they can strip the vehicles for parts and then sell those parts to help fund their cause. Other groups have in-house mechanics who can evaluate cars and trucks that might not be in the best of shape, and determine whether they are worthy of repair. The groups then either sell the vehicles for a profit to the general public, or sell them at a discount to people who need affordable transportation.

If the vehicle is in good condition, it may be sold to raise funds or be used by the charity as part of its own operations. Uses can include community rideshare services, transporting goods, supplies, or materials for various projects, or building awareness.

Does Any of That Affect My Tax Deduction?

Understanding how an organization is going to make use of your donated vehicle is important if you want to maximize the tax benefits. It's important to ask in advance what a charity's plans are for your automobile, as the tax deduction associated with donating a vehicle is entirely dependent on how the charity uses it.

If the vehicle is sold, then the deduction is based on its sales price, with a minimum deduction of $500 for most running vehicles. If the charity uses the car or sells it at a discount to someone in need, then the deduction is tied to the vehicle's fair market value. The charity is required to notify you in a timely fashion about how it uses or disposes of your vehicle so you can make the appropriate deduction.

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Benjamin Hunting
Benjamin Hunting is a writer and podcast host who contributes to a number of newspapers, automotive magazines, and online publications. More than a decade into his career, he enjoys keeping the shiny side up during track days and always has one too many classic vehicle projects partially disassembled in his garage at any given time. Remember, if it's not leaking, it's probably empty.