Upgrading your vehicle is exciting, especially when you get an upgrade in features and the vehicle has that new car smell. But what should you do with your old vehicle? You may decide to designate your old vehicle as a car for your newly licensed teenager, but you can also gift your vehicle to a friend or donate it to a local charity. If you’re interested in donating your vehicle, learn how to go about doing it and things you should look out for in the process.
Owner of the Vehicle
To be eligible to donate a vehicle, you have to be the owner of the vehicle. This information is particularly important if the vehicle has a loan on it, which means the lender is the owner of the vehicle until you’ve paid off the loan. Therefore, you’ll have to pay off the loan before you can donate the vehicle. This also means you can’t give away your mom’s car since the title would be in her name.
Gifting Your Vehicle to a Friend
It’s a fairly simple process to gift your vehicle to a friend. Be sure to check your state’s rules before starting the gifting process, but essentially you sign over the title to your friend and then contact the Department of Motor Vehicles to release your liability on the vehicle. Your friend is then responsible for registering the vehicle and getting the title issued under their name. If your vehicle is worth more than $12,000, you may be charged a gift tax.
If you still have a loan on the vehicle, you’ll need to transfer the equity of the vehicle to your friend, who will then have the responsibility of paying off the loan.
Donating Your Vehicle to a Charity
The process for donating your vehicle is a little different than simply gifting your car. First, find a charity or nonprofit organization you’d like to donate to. Then, make sure the organization is able to handle a car donation. In general, if the nonprofit is registered as a 501(c)(3), they should be able to take your car as a donation.
While a middleman company can help you donate your car, your chosen nonprofit organization will receive more if you work directly with the organization. You should receive a receipt from the organization right after making your donation, and you may also receive a 1098-C form in the mail.
Claiming a Tax Deduction
If you plan to itemize your tax deductions, the most you can claim as a deduction from your donation is the fair market value of the vehicle. Depending on the value of your vehicle and what the organization does with your donation, you may need to provide the 1098-C form the nonprofit sent you and a written appraisal if the charity does not plan to sell the vehicle. In general, if you deduct $500 or less for your car donation, you won’t need to provide documentation, but be sure to hang on to that receipt.
The process for gifting or donating your vehicle is quite simple. Plus, it’s a great way to free up your lot and help someone else in need.
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