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
promotion soliciting car donations may mention a charity name that
sounds like an organization working in your community, but that may
not 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 programs
take 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 group
that closely matches the needs or charitable concerns you would most
like to support. Don’t confine your potential recipients to the one
or two charity promotions you recently saw in ads.
ago, only a handful of charities were known for accepting these type
of donations. In recent years, these contribution requests seem to
be everywhere. While this reflects the competition for the charitable
dollar among a growing number of organizations, this growth is also
due to the emergence of third-party brokers. These are for-profit
firms that may sign up a number of different charity clients located
in different parts of the country, solicit for donated cars on their
behalf, sell and/or auction the cars, and then provide the charity
with some portion of the dollars raised.
The donated car benefit to the charity can vary considerably depending
on the arrangements. In some cases, the full amount of the donation
goes to the organization if the charity sells the car itself or uses
the vehicle to help fulfill some program services, for example, delivering
meals to homebound individuals. If a third-party broker is involved,
however, the charity may receive only a percentage of the resale price
of the car (maybe less than 20 percent) or it may receive a portion
of 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-party
broker has no relationship to the re-sale price of the used car. The
organization may receive a flat fee (such as $100 per used vehicle)
or a monthly agreed upon amount (such as $2,000 per month) that is
not dependent on the total dollar value of sales incurred by the used
car fundraising company. Finding out the nature of the charity’s financial
relationship to the resale of the car is important, since a flat fee
situation may result in making your used car donation ineligible for
a tax deduction.
In order to take a tax deduction for donating a car, boat, or other
vehicle, there are a number of other things you should keep in mind.
First, verify that the recipient organization is tax exempt as a charity
under section 501 (c)(3) of the IRS code. To verify that a charity
is eligible to receive contributions deductible as charitable gifts,
you can do one or more of the following. See if the organization is
listed in IRS Publication 78, the Cumulative List of Organizations,
available at most libraries. Visit the online version of the publication
at www.irs.gov/search/eosearch.html. Or ask the organization for a
copy of its tax exempt status determination letter. (Note that churches
are not required to apply for exempt status, and may not have such
a letter or be included in the IRS publication. A car donation to
a church, however, would still be deductible.)
you can deduct only the fair market value of your car donation. In
other words, this is the price the car would sell for today in its
current condition. If the used car is not in good condition and needs
significant repairs, don’t believe promotional promises that claim
you will be able to get "top value" for your car donation
based on one of the latest published guides that show the average
regional prices for various used cars. If you are claiming the car
is worth $5,000 or more, you will need to get an official outside
appraisal in order to substantiate the claimed value.
car donation of $500 or above, you will need to complete and attach
IRS Form 8283 to your tax return. For your records, you will need
proof that you made a charitable gift. The best evidence is to transfer
the title of the car to the charity and keep a copy of this document.
This title change also will help you avoid potential problems than
can occur if the car is somehow parked illegally by the organization
or is involved in an accident or other mishap before the charity is
able to resell the vehicle.
Corrections or additions?
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