What is the best way to dispose of an old iMac?

If it is working, erase the Hard Drive and drop it off at your local E-Waste Recycler.

google "E-Waste Recyclers"

If it is not working and you are worried about your personal data, remove the hard drive before recycling it.

Follow D.I. Johnson's suggestion and drop it off at the nearest Apple store.

What to do before you sell, give away, or trade in your Mac:

https://support.apple.com/en-us/HT201065