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Car donation services have become such an industry -- with fundraisers, middlemen and auction houses -- that Congress enacted tighter laws in 2005 to regulate them. The goal was to end abuses in car donation services, where donors were inflating the value of their auto to get higher tax deductions.
There also were reports of individuals and groups, including used car dealers, trying to pass themselves off as charities to get car donations. The tougher laws end a lot of the problems and return the focus to giving. Donors with vehicles valued at more than $500 now must limit their tax deduction to how much the charity gets when reselling the vehicle. Many charities go through auction houses and hire fundraisers to handle vehicle donations. Some charities get a flat fee for each donated vehicle, no matter its value, while others split the proceeds with the for-profit companies that handle the sales.
It makes sense to check with various car donation services to find out what portion of the proceeds from car donations actually go to charitable programs.
Car donation services, and the charities they benefit, should make donating as easy as possible for you as a donor. An organization that specializes in international giving will help make directing your donation to deserving causes abroad easier and more effective. Look for organizations that have a professional grant-making staff experienced in overseas work, and ask about the organization's due diligence and accountability procedures. The organization should handle all legal and regulatory issues and ensure that funds are delivered promptly and safely, and that those funds are used for their intended purpose. The Family Care Foundation is one such organization, with access to established and reputable organizations worldwide. FCF also has low administrational overhead, meaning more of the proceeds from your donation make it to the people and organizations in need.
New tax laws that went into effect in 2005 have led to more paperwork for folks who want to make a car donation and claim a tax write-off.
With the tighter tax laws, charities are providing IRS forms as part of their car donation services. If donors claim a deduction of more than $500 for the donated vehicle, they will need to file IRS Form 1098-C.
But don't let the redtape deter you. Reputable charities provide the forms, or a written acknowledgement disclosing how much the donated auto sold for at auction.
The amount of the gross proceeds is the amount of the tax deduction. Expect to get the form from the charity within a month of the sale. If the form arrives after a tax return is filed, the donor needs to file an amendment to the return. Talk to an accountant for more information.
If the donated vehicle is worth $500 or less, the taxpayer doesn't need to file Form 1098-C. But the donor still needs a receipt from the charity stating the value of the vehicle donation.
Car donation services will walk you through the vehicle donation process. They have direct access to eligible charities, and they have deep experience in the procedures to follow and documentation to provide to ensure that you receive a tax deduction, and that the charity receives the greatest benefit from your donation.
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.
Selling a vehicle can take a lot of time, and doing so privately may expose you to security risks, legal liability, wasted time and the additional expenses of taxes and insurance on a vehicle you are not using. If you choose donation and use a vehicle donation service, you can usually complete the transaction within a few days – getting rid of your unwanted vehicle quickly and easily while helping out worthy causes.
Car donation services are appealing because they benefit good causes, but also because they provide a tax write-off for Americans. But understand that the tax write-off may not be the value donors can get selling their vehicles through classified ads. Why? Because new federal tax laws limit the deductions that taxpayers can claim for their vehicle donations.
Look for car donation services that plan to keep and refurbish donated cars to use in their charitable works. The IRS permits donors to take fair market value for their deduction, when charities use the car donation in their programs.
Chances are, though, that the charity will sell your vehicle or its parts at auction, for a lower price than you can get on the market.
Say you think your donated vehicle is worth $1,200, but it sells at auction for $725. The lower amount is what you are entitled to claim as your tax deduction. Before contacting car donation services, make sure that donating your vehicle is the right choice for you.
Many cars that are donated are not simply driven around by the charity that receives them. Rather, many older vehicles donated through car donation services are disassembled and the parts sold or recycled. This helps cycle older, less environmentally-friendly vehicles out of the system, this helping to reduce emissions and open the market to more fuel efficient vehicles.
The Internet is a giant boost for car donation services. In an instant, vehicle donors can access hundreds of charities that offer car donation services. What kind of information can you find on the Internet?
-- Locate the charity's Web site, and read about its car donation services.
-- Pick a car donation program that handles your community and neighborhood.
-- Determine if the charity is in good standing with the consumer division of your state Attorney General's Office.
-- Fill out application forms to donate your unwanted car to specific charities.
-- Look up the number and location of the nearest branch of the Department of Motor Vehicles. The DMV will replace lost titles.
-- Access and read a charity's annual report.
-- Check the rating a charity gets from various Web-based watchdog groups.
-- Go to the IRS Web site to learn more about the new rules for claiming tax deductions for your vehicle donations.
-- Read news articles and blogs on vehicle donations.
There are hundreds, even thousands, of car donation services competing for your charitable donations. Take full advantage of the competition to ensure your needs are met when giving. The unwanted vehicle sitting in your driveway may be the most valueable charitable gift you make in a year.
The nonprofit group Network for Good encourages donors to be informed, and to ask questions. This is especially true for car donations, where you may not be sure how your donation will benefit the cause or service you want to support. Unless you ask. Hidden costs for processing cars sometimes leave little for the charity's mission.
Here's some giving advice from Network for Good:
-- Use the Internet as a research tool to find the charity and cause you want to support. Network for Good, for example, offers a free database of more than a million charities. Look up the charities in your zipcode.
-- Ask the charity how it plans to use the proceeds from selling your car donation. Ask to see its most recent annual report, which will show its financial health.
-- Protect your privacy. Ask if the charity shares, or sells, your personal information with other organizations. You may want to tell the charity not to share information about you. Most charities have a policy that allows refusal.
-- Keep your receipts. Expect to get a receipt when you make your car donation, and a second receipt when the car donation is sold. You will need these for tax purposes.
The Family Care Foundation provides a range of humanitarian services, as well as training and support for local organizations and community-based initiatives. The FCF acts as an incubator for effective philanthropic ideas and entrepreneurial leadership, provides capacity-building training and technical assistance, and offers medical, disaster-relief and medical services in developing communities.
Donate Car for Charity is part of the Family Care Foundation (FCF), an IRS registered 501(c)3 nonprofit organization that offers assistance to orphans and homeless children, the physically challenged, and many others in need. The proceeds of vehicle donations made to Donate a Car for Charity will help provide HIV/AIDS care, medical relief, computer literacy, drug awareness programs, emergency relief, education and food programs.
Want a quick look at 300 car donation services in the U.S.? Just click on NADAguides.com and link to vehicle donations. The Web site offers a database of 300 charities that have car donation services. N.A.D.A. Appraisal Guides (nadaguides.com) publishes vehicle valuations on new and used vehicles, including cars, trucks, RVs, motorcycles and boats. The company's Web site offers a thorough guide of car donation services as well as information on valuing your new and used vehicles.