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Better Business Bureau Offers Advice on Vehicle Donations
The Better Business Bureau offers general advice to people who want to make vehicle donations:
* Do research and ask professionals for help.
* Seek legal and financial advice before you donate your car. Does it make financial sense to donate your vehicle? Is the charity able to meet your giving needs?
* Get the charity's annual report and read it. Find out how the charity managed its budget in the last fiscal year, including how it spent income from vehicle donations.
* Ask the charity how it uses donated vehicles. Does it resell them at wholesale prices? Or does it refurbish the vehicles for disadvantaged families that need transportation?
* Get receipts. Make sure the receipt has the registered charity's identification number on it.
* Check with your state Attorney General's Office to make sure the charity is registered as a 501(c)3.
* Contact the Better Business Bureau to find out if it has information on file about the charity and its vehicle donations.
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Charities May Hire Firms to Run Car Donation Programs
Donate Car For Charity Tip: If you plan to donate a car, first research vehicle donation programs in your area. Then choose the type of program that suits your interests. Some vehicle donation programs are clearinghouses for car donations. These organizations often work on behalf of many charities.
The companies are paid by the charities to manage their vehicle donation programs. They collect and sell the car donations, taking part of the sales revenues. The rest of the money goes to the charities the organizations represent.
The tax deduction a donor can claim is the amount the charity receives in gross proceeds from the sale, if the vehicle is valued at more than $500. Some charities run their own vehicle donation programs, though they are likely to be larger nonprofits that can afford the costs of managing car donations. In-house vehicle donation programs tend to bring in more funds for the charity and the causes it supports.
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Ask Questions Before Making Car Donations
Many major charities accept car donations, letting people donate used vehicles for a good cause and get a tax write-off in return. But the process is not as simple as making a phone call, dropping off your unwanted vehicle and reaping the benefits of a tax write-off. First, learn the charity's mission. If you have a specific intent in mind for the gift, let the charity know. If it cannot meet your goal, you may want to consider other ogranizations. Charities may use car donations in their charitable work. For example, a car donation may directly help needy people with transportation. Most likely, the vehicles will be sold to raise money for the charity's programs or general fund. If the vehicles are sold, find out which programs the revenues fund. Perhaps the money can go to a particular charitable service or cause you support. Finally, ask if the charity oversees car donations or pays a firm to do it. If a for-profit company handles the vehicle donations, find out how much money the charity will receive from the sale and how much will go to the for-profit company. This kind of information may help you direct your car donation to the charity and cause that match your interests and goals.
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Keep in Mind Tax Filing Deadlines When Donating a Vehicle
Donate Car For Charity Tip: The best thing about vehicle donations is you can make them anytime, from just about anywhere in the United States. If you plan to take a tax deduction when you donate your vehicle, give yourself plenty of time to make the transfer and collect required documents. The bottom line is: Allow yourself time to complete the process in the tax year for which you want the write-off. Typically, a charity can collect your vehicle within two weeks after you complete an application form. Some can do it in a few days. Many major charities -- or the fundraisers that represent them -- have large outreach programs that enable them to collect from just about any town. Leave time to find your vehicle title, or replace a lost one. Your local department of motor vehicles may take two to three weeks to mail you a new title. If your vehicle is worth more than $5,000, you may be required to get an appraisal shortly before the transfer. You cannot use an old appraisal. After you make the vehicle donation, the charity likely will sell it. You will need a written acknowledgement of the sale to attach to your income tax forms, if the car is valued at more than $500. The charity is responsible for sending you an acknowledgement in 30 days after it resells the car.
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How to Calculate the Car Donation Tax Deduction
The IRS only allows taxpayers to use the fair market value for a car donation tax deduction, when certain conditions are met.
The car donation cannot be worth more than $500 to receive a car donation tax deduction. Or, the car donation has to be used directly by the charity in its programs or services.
For example, if a charity uses a car donation for its meals-on-wheels program, the donor may be entitled to claim the car's fair market value as a tax deduction.
But the vehicle needs to be in proper condition for the donor to assign fair market value.
Be careful. Your used car's value may not be as high as the listing in area pricing guides. High mileage and the vehicle's condition may lower the value.
Check with the IRS to learn more on figuring your car donation's value at tax time.
Two publications may help: IRS Publication 526, "Charitable Deductions," and IRS Publication 561, "Determining the Value of Donated Property."
The guidelines make it easier for taxpayers to follow car donation tax law when giving to charities.
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Avoid Pitfalls in Donating Your Vehicle
Donate Car For Charity Tip: Remember how careful you were in negotiating prices and looking for the best value when you bought your vehicle? You need to be as savvy when you turn to car donation services to dispose of unwanted cars. Sure, you can get the tax write-off, but there are potential pitfalls along the way. -- The charity needs to be a 501(c)3 nonprofit for you to claim a tax deduction. -- You need to document the gift-giving and show proof to the IRS at tax time. -- The title must be transferred to the charity, or the donor could face problems legal problems from unpaid parking tickets and traffic violations that belong to someone else. -- Make sure the charity will dedicate a large portion of its proceeds from car donations to charitable causes. Some charities have high administrative costs with little money going to causes and programs.
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Car Donation Services Benefit Donors in a Variety of Ways
What are you looking for in car donation services?
If it is simply speed, convenience and a program that will take an inoperable car, you may want to contact a national clearinghouse that represents a lot of charities.
These companies specialize in collecting just about any vehicle, no matter the condition. The companies will tow away and sell junk cars for their parts.
If you are seeking a charity than can make full use of your vehicle donation, you may have to do a little more work.
Check with your local United Way or Attorney General's Office to find a list of registered charities in your community.
Call the ones that interest you, and ask a lot of questions. Make sure the charity will use the donation for the services you want to support.
You may want to avoid charitable organizations that have high overhead costs for their vehicle donation programs. The high costs mean less money for the charity's programs and services.
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When to Deduct a Car's Fair Market Value
Donate Car For Charity Tip: When claiming a car donation tax deduction, the IRS lets taxpayers use the vehicle's fair market value, provided certain conditions are met. Taxpayers may want to consult an accountant on car donation IRS rules before claiming a car donation at fair market value. The IRS offers the following guidelines: * It may allow a tax deduction for the car's fair market value if the recipient organization "makes significant intervening use of the vehicle," or if the recipient makes major improvements to the vehicle. * The IRS may accept a deduction of fair market value, if the charitable organization gives away the car for free, or sells it at a much lower price, to help "the poor and distressed or underprivileged." * Finally, the IRS may accept a car donation tax deduction for fair market value if the claimed deduction is $500 or less. The IRS offers guidance in determining whether you can deduct a car's fair market value when making a car donation to a charity. Call, toll free, 1-800-TAX-FORM, or go online to IRS.gov, then click on the link for Publication 526, "Charitable Deductions."
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