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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 newspaper

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.

Be aware of for-profits operating in this arena. Not long

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.

Make sure the organization qualifies as a tax exempt charity.

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.)

Figure the tax deduction. If the organization is a charity,

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.

Nail down the paper trail. Also, if you are claiming a

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.


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