Donate Your Car to Charity
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Is it possible to donate a used car to charity instead of selling it or trading it in, and "come out ahead"? I've
heard advertisements by charities claiming this, but don't see how it's possible.
These advertisements can be very misleading. When you donate a car to charity, the tax savings from your
deduction equal the market value of the car times your top tax bracket. This is only a percentage of the car's
value, so you can't save as much as you could gain by selling the car at or near its value.
Example: If you are in a 31% tax bracket, donating a car worth $1,000 will save only $310 in tax.
Donating a car might save some cost and effort related to selling it (advertising, meeting buyers, etc.). And it
might make you feel good about helping the charity. Whether or not this is enough to "come out ahead" is
your call.
While some deductions for used-car donations are legitimate, programs that advertise deductions at "full
blue book value" regardless of a car's condition are not. Some charities are simply licensing their names to
used-car dealers -- in which case no deduction is legal, the arrangement may be an illegal tax shelter, and
the charity may have its tax-exempt status revoked. Safety: Deduct only the real market value of a car donated
to charity -- and be sure the charity actually receives it.
Auto-donation-to-charity programs have been highlighted for audit, we hear from tax attorney Randy Bruce
Blaustein. Problems: Donors often believe they can deduct the full blue book value of a used car even for
clunkers that must be towed away. Many charities hire third parties to manage their donation programs and
do not provide the written acknowledgment, including a description of the car, that is needed to support a
charitable deduction. Charities often fail other legal requirements as well, such as proper title transfer.
To get rid of an old car that nobody wants to buy: Give it to one of the many charities that solicit used-car
donations. Approximate the car's value (based on mileage and condition) on the receipt, which you can use
to justify a tax deduction Donate it to a technical or vocational school, which can use it for training purposes
and will also let you write it off See which local auto salvage places will pay the most for it Sell it for parts on
Internet auction sites.
Many people are participating in car donation these days as opposed to selling or junking their old vehicles.
Although it can be a tax deduction if you donate to a reputable entity, the real benefit comes from knowing that
the sale of your car will provide food, shelter and medication to the underprivileged.
Although the vehicle donation process used to be quite tedious - with multiple phone calls, numerous forms
to fill out and the fact that you had to drive your vehicle to the donation center - it is now much simpler. You can
essentially complete the entire process in a matter of minutes...all you need is a computer and an internet
connection.
There are a number of reputable sites online that take car donations for charity. A little research will help you
find the one that's right for you. In most cases, you will have to fill out a brief form with information about
yourself and your vehicle. If you would rather call up and speak with someone, you can do that too. Most of the
better companies will have a live operator who can not only take your information, but provide more
information about the program, including tax deductions, pickup arrangements and which charities the
donations will go to upon the sale of your automobile.
Once you have submitted your vehicle donation information, you can make arrangements for pickup...as we
mention above, you do not have to drive the car there yourself. This can usually be set up within a few days,
and it can be picked up either at your home or at an agreed upon location. You also do not have to be present
at the time. They make it very convenient and easy for you to donate your car to charity.
You do have the added benefit of a tax deduction for your car donation, which is usually up to $500, or more if
the company is able to sell your auto for more money. Essentially, the deduction can be for the full price of the
car, subject to a few restrictions.
Although car donations for charity usually go to a specific organization, in some cases you may be able to
choose where the proceeds of the sale go. But as long as it goes to a reputable charity it's worth it.
So if you're thinking of getting rid of your old car, consider a charitable vehicle donation. Isn't knowing that the
sale of your car helped feed or clothe someone in need more satisfying than a couple hundred extra dollars
in your pocket? We think it is.
What can be more noble than donating your old car to charity? You save yourself the hassle of having to sell
the old used vehicle outright. You don’t have to run an ad, answer the phone calls regarding the car, and stay
home to show the car. You don’t have to worry about test drives, bad checks or who is going to knock on your
door. You can avoid all of these problems by donating the car to charity and obtaining a tax deduction for the
donation. Beware! Part of this tax loophole has been closed. Before you donate a car to charity you should
know what the relevant tax laws are.
It used to be that the taxpayer who donated a car to charity could deduct the fair market value of the vehicle.
Now the allowable deduction is $500 for a car donated to charity if the charity sells the vehicle, which most
charities do. You cannot deduct the fair market value of the donated vehicle unless certain conditions are
fulfilled. The charity must make improvements to the car and give it to a needy person. If the charity does this
with your donated vehicle and it is documented, then you donor can deduct the fair market value of the
vehicle. This is also true for planes, boats, and other vehicles. Specific tax forms have to be filled out and filed
in order for the fair market value deduction to be allowed.
An internet search reveals that almost every charity will accept the donation of cars and other vehicles. They
make it very simple for the donor in that all the donor has to do is to sign over the title. The charity handles the
pick-up and transportation of the vehicle. Most charities then sell the car at auctions like E-Bay. The money
from the sale is then used for their charitable works. Some charities, like the Salvation Army, have their own
used car lots where they sell the donated vehicles. This is the situation that results in a $500 tax deduction
for the donor.
Some charities accept car donations and use them for occupational training for the disadvantaged. They fix
the cars and make improvements and then give the car to a needy individual. This kind of situation results in
people receiving occupational training and a needy individual receiving a functioning car. This is the situation
where the donor can deduct the fair market value of the car.
