Corrections or additions?
This article by Kathleen McGinn Spring was prepared for the December 18, 2002 edition of U.S. 1 Newspaper. All rights reserved.
How To Give Your Car Away — Wisely
The Better Business Bureau maintains an online Wise
Giving Alliance at www.give.org. It contains advice for donors, for
businesses, and for charities. Among the issues it tackles is the
matter of how to donate a car to a charity. Such a gift, it points
out, is often among the largest an individual is likely to give. There
are substantial tax advantages, but also potential traps. Here is
some advice.
Look beyond the loudest ads. A radio, television, or newspaperpromotion soliciting car donations may mention a charity name thatsounds like an organization working in your community, but that maynot be the case. In fact, it may actually be located many states away.If you are not familiar with the charity, its location, and its programstake the time to check it out to avoid being disappointed later.In addition, since so many organizations now accept donated cars,with a few calls and a little research, you can probably find a groupthat closely matches the needs or charitable concerns you would mostlike to support. Don’t confine your potential recipients to the oneor two charity promotions you recently saw in ads.Be aware of for-profits operating in this arena. Not longago, only a handful of charities were known for accepting these typeof donations. In recent years, these contribution requests seem tobe everywhere. While this reflects the competition for the charitabledollar among a growing number of organizations, this growth is alsodue to the emergence of third-party brokers. These are for-profitfirms that may sign up a number of different charity clients locatedin different parts of the country, solicit for donated cars on theirbehalf, sell and/or auction the cars, and then provide the charitywith some portion of the dollars raised.The donated car benefit to the charity can vary considerably dependingon the arrangements. In some cases, the full amount of the donationgoes to the organization if the charity sells the car itself or usesthe vehicle to help fulfill some program services, for example, deliveringmeals to homebound individuals. If a third-party broker is involved,however, the charity may receive only a percentage of the resale priceof the car (maybe less than 20 percent) or it may receive a portionof what is left after all the expenses have been paid by the broker,which can result in even smaller amounts going to the charitable cause.In some situations, the amount the charity receives from a third-partybroker has no relationship to the re-sale price of the used car. Theorganization may receive a flat fee (such as $100 per used vehicle)or a monthly agreed upon amount (such as $2,000 per month) that isnot dependent on the total dollar value of sales incurred by the usedcar fundraising company. Finding out the nature of the charity’s financialrelationship to the resale of the car is important, since a flat feesituation may result in making your used car donation ineligible fora tax deduction.Make sure the organization qualifies as a tax exempt charity.In order to take a tax deduction for donating a car, boat, or othervehicle, there are a number of other things you should keep in mind.First, verify that the recipient organization is tax exempt as a charityunder section 501 (c)(3) of the IRS code. To verify that a charityis eligible to receive contributions deductible as charitable gifts,you can do one or more of the following. See if the organization islisted in IRS Publication 78, the Cumulative List of Organizations,available at most libraries. Visit the online version of the publicationat www.irs.gov/search/eosearch.html. Or ask the organization for acopy of its tax exempt status determination letter. (Note that churchesare not required to apply for exempt status, and may not have sucha letter or be included in the IRS publication. A car donation toa church, however, would still be deductible.)Figure the tax deduction. If the organization is a charity,you can deduct only the fair market value of your car donation. Inother words, this is the price the car would sell for today in itscurrent condition. If the used car is not in good condition and needssignificant repairs, don’t believe promotional promises that claimyou will be able to get “top value” for your car donationbased on one of the latest published guides that show the averageregional prices for various used cars. If you are claiming the caris worth $5,000 or more, you will need to get an official outsideappraisal in order to substantiate the claimed value.Nail down the paper trail. Also, if you are claiming acar donation of $500 or above, you will need to complete and attachIRS Form 8283 to your tax return. For your records, you will needproof that you made a charitable gift. The best evidence is to transferthe title of the car to the charity and keep a copy of this document.This title change also will help you avoid potential problems thancan occur if the car is somehow parked illegally by the organizationor is involved in an accident or other mishap before the charity isable to resell the vehicle.Previous StoryNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
