The question of whether or not a car is totaled isn’t always an obvious one. Sometimes your car will look like a flattened wreck, and you won’t be surprised to hear your insurer’s verdict. Other times, though, it might look merely dinged up, but the necessary repair is so costly and the car as a whole so cheap that it makes sense to declare it totaled.
If an accident claim was made against your policy, the insurer will first subtract the deductible from the actual cash value before writing you a check. If you still owe money on the car, you’ll have to pay it off with this check from the insurer.
If you disagree with the insurer’s figure, look into your policy and see if you can hire an appraiser for a second opinion. If the appraiser also disagrees, you and your insurer will go through arbitration to reach a settlement. Just be sure that the disagreement is significant, as you’ll be responsible for paying for the appraiser no matter what comes out of the arbitration process. [4] X Research source
If you have a car loan, your lender holds the title to the car and must be involved in the transaction.
If your car is insured and your company has declared it a total loss, you’ll need to let them know that you intend to keep the vehicle. They’ll still cut you a check for the car, but they’ll deduct the estimated amount of money that they would have received for it from a junkyard or dealership.
Different states and countries have varying salvage auto regulations, so be sure to check your particular state’s or province’s guidelines to make sure you’re filling out all the proper documentation. In some places, the Department of Motor Vehicles will charge you a small fee for the salvage certificate. In Illinois, for example, a salvage certificate costs four dollars. [8] X Research source
Just be sure to explain that your car is a salvage vehicle, as this ‘brand’ or status of the car makes it more difficult to insure and sell in the future.
Most salvage yards will have their own, set rates for buying vehicles if they intend to crush it down for scrap metal. In this scenario, you can expect around $75 per ton for your car. Also consider other factors, such as whether or not the junkyard will pick up your car for free, or if you’ll be expected to dispose of non-metal materials, such as tires, before turning over your vehicle.
Also double-check your car before handing it over to make sure you haven’t left any personal belongings in the trunk or main interior.
If you live in the U. S. , you’ll also want to call the DMV after a week or so to verify that the title has been transferred over to the junkyard. If the process is delayed, you could be liable for your vehicle well after you thought you had relinquished ownership. [14] X Research source
Some charities which accept car donations are the Make-A-Wish foundation, Kars4kids, and Vehicles For Veterans. [16] X Research source If you’re not sure if the charity you’re considering has ‘exempt-status,’ contact your federal tax governing body to ascertain whether or not it qualifies.
If your car still runs, see if you can take the car to a drop-off location for the charity. This will maximize the proceeds your charity earns from your salvage vehicle, as otherwise they’ll have to pay for the towing service. [17] X Research source
Just because you’ve arrived at a fair market value for your car, you can’t deduct this figure yet. You can only do so if or when the charity sells your car for its fair market value and notifies you of this sale.
If you don’t receive notification prior to the tax deadline, you can file for an extension. Alternatively, you can file your taxes without the car donation and then amend the return once you receive a notification.
The charity should send you a tax receipt in the mail to help you when filling out your tax return. [19] X Research source
For example, if you’re in the 20% tax bracket and you itemize your car donation for $2,000, you’ll get a benefit of $200. But, if you don’t have a bunch of other itemized donations to add on top of that $200, you’ll end up saving well below the standard income deduction. This guideline holds loosely for residents of the U. S. , but you should check for local and federal policies no matter where you live.
If your car is worth more than $5,000, you’ll need to fill out Section B of IRS Form 8283, as well as get an independent appraisal of the car to verify its worth. Attach this appraisal to your return, as well as any other pictures or records which attest to its value, such as receipts for new tires or pictures of other upgrades.
Remember that any discrepancy between what you claimed for the car and what it was actually worth or sold for will result in a penalty for you, the donor, rather than the charity.
In many places, you’ll also need to remove the license plates and return them to the motor vehicle agency. In other places, such as Alaska, California, Hawaii, and Minnesota, you can leave the plates on the car.
