After years of work commutes and road trips, your car may need a few repairs and a little paint. You take the car to the dealer for repairs and find yourself looking at new cars. If you get a new car, what will you do with the old one? When you part with a car, you can sell, donate or give it away. If selling is out of the question, you may want to donate the car to a charity for a tax deduction. Or you can give the car away to a friend or relative. Here is a guide on give away a car.
Instructions
Give Away a Car for Free
1. Consult with your accountant about potential tax benefits or fees before you give away the car. If you donate your car to a 501(c)(3) charity, you should be entitled to a tax deduction. The deduction amount will depend upon the fair market value of the vehicle and how the charity uses the car. Some states may require a tax fee if you give your car away. Ask your accountant for advice on prepare the transaction to comply with tax laws.
2. Research car charities if you plan on making a donation. To avoid scams, verify the legitimacy of the charity. Contact the Better Business Bureau and the National Consumer League's National Fraud Center to learn about the charity's business practices. Research the car charity by reviewing their annual report to find out how they use donated cars and spend their income. Request a copy of the charity's Internal Revenue Service letter of determination to verify its tax-exempt status.
3. Determine the fair market value of your car if you are eligible for a tax deduction. Use a Kelley Blue Book or a National Auto Research Black Book to determine the value of cars worth less than $5,000. For cars worth more than $5,000, have an expert appraise the vehicle's market value. Take photographs of your car to document the condition. Keep the market value information and photographs with your tax preparation records. Your tax deduction amount depends upon the car's market value and if the charity uses the car for charitable purposes or sells the car for scrap.
4. Follow state laws for the transfer of car titles and license plates. If you are required to transfer the car title or remove license plates, do so before the new owner takes possession of the car to avoid any liability for accidents or tax issues.
5. Obtain a receipt from the new owner or charity and keep it for your tax records and as proof of the transaction. You may need the receipt if the Internal Revenue Service, Department of Motor Vehicles or your insurance company requests documentation of the transfer of ownership.
6. Ask the new owner to pay for the removal of the car from your property if it requires towing. Some charities charge to pick up vehicles, even if the car is drivable. If so, you may be able to avoid the fee by driving the car to the charity.
7. Inform the local Department of Motor Vehicles and your automobile insurance company of the transfer of ownership in writing. Include a copy of the transaction receipt with the notifications. Keep a copy of the letters for your records.
Tags: market value, give away, cars worth, charity uses, deduction amount, Department Motor
