To qualify for a tax deduction from your donated car, you must give to a beneficiary that is registered as a 501(c)(3) organization. In other words, a registered nonprofit.
Charities often include “501(c)(3)” in their descriptions to inform people that they’re nonprofits. The term refers to the section in the Internal Revenue Code, which states that an organization can qualify for tax exemption if it operates for purposes of religion, charity, science, testing for public safety, literature, education, promotion of amateur sports, and prevention of cruelty to animals and kids.
To give you a clearer picture, notable institutions that fall under 501(c)(3) include People for the Ethical Treatment of Animals (PETA), the American Red Cross, United Nations Children’s Fund (UNICEF), and The Salvation Army. As nonprofit organizations, any donation they receive in cash or kind must be used for the purposes stated.
All over the U.S., there are roughly two million registered nonprofits. The IRS has an online tool you can use to determine whether or not a charity is a registered nonprofit. It’s important for the beneficiary to be registered with the IRS, not only because of the promise of tax deduction, but also because you would want to make sure your donation is going to the right cause.