2012 iMac Has Been Replaced with M2 Mini... What to do with old iMac?

To properly prepare it, see > What to do before you sell, give away, or trade in your Mac - Apple Support

Then donate it to a family member, friend, local charity or..

recycle it at your local AASP or E-Waste collection center.

Options for continued use of the hardware include using it as an OpenBSD server or Linux server doing things of local interest (maybe for NextCloud services, etc), or running the last macOS version for it and configuring it as a network storage server for Time Machine backups or otherwise with some added disks.

Hi there!

If you don't have a use for your old Mac, Apple makes it easy to recycle your device in your country or region.

National Services - Apple

Jack

You're welcome.