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At Charity Navigator, our primary purpose is helping America's donors
make informed giving decisions when they part with their hard-earned
dollars by writing a check to charity. In the past few years, however,
more and more donors are attempting to help themselves, and help others,
by donating their used automobiles to charity. This has become a
massive business. In the year 2000, nearly ¾'s of a million people took a
car donation deduction on their federal tax returns, thusly lowering
their taxes by over $650 million.
As America's car donation system is currently construed, it is easy
for donors to benefit greatly by donating their cars, albeit with a
little risk. By following these
10 Charity Navigator Tips For Charitable Auto Donations, you can minimize that risk, and maximize the amount that actually gets to charity.
1. Find a Charity That Directly Accepts Car DonationsIf
at all possible, avoid the for-profit intermediary organizations that
advertise so pervasively to handle your car donations. When you work
with one of these organizations, they keep the vast majority of the
dollars created from your donation. Even the most reputable of the
agencies that handle these transactions keep nearly 50% of the car's
value for their troubles (other, less scrupulous entities keep 90%, or
even more). If you can find a charity that handles the transaction
themselves, they can keep 100% of their profits. It's possible that the
charities you already support have a car-donation program that you don't
know about. Check with them first.
2. If Your Charity Doesn't Accept Cars, Take the Time to Find a Charity That Does, and Still Does Work You RespectRemember
that you're still making a charitable donation, and don't simply give
your automobile away to any charity, just because they're a charity. Do a
little research, and find a high-performing charity that does the kind
of work you like, in the region you wish to target, and does that work
well.
3. If It Runs, Drive the Car to the CharityWorthy
charities are going to have to pay someone else to handle a pick-up or a
tow. This is yet another cost that cuts into the amount that gets to
that organization's programs. If you can get the car to them yourself,
do it.
4. If You Have to Use a Intermediary Agency, Research the Percentage that Gets to CharityThe
IRS does not require the car donation agencies to contribute a set
amount of the auto's proceeds to the intended charities; that amount is
negotiated between the charities and the handlers. Try to find an agency
that maximizes that amount, and call the charity to confirm that number
before you give. The charities are reluctant to criticize the
middlemen, because they don't want to lose the dollars they do receive,
but state attorney generals are beginning to investigate and even
prosecute these for-profit middlemen, for holding themselves out as
charities and misleading the public on the amount that is actually
reaching charitable causes.
5. Make Sure Your Intended Organization is a 501 (c) (3)While
many organizations can claim non-profit status, donations to 501 (c)
(4) organizations are generally not tax-deductible. These are political
organizations with permission to lobby our government; like Disabled
American Veterans or the National Rifle Association. Make sure your
intended recipient has 501 (c) (3) public charity status.
6. Transfer the Car Correctly to the CharitySome
charities will ask you to leave the assignment of ownership space on
the charity donation papers blank, so they don't have to re-title the
auto. If your charity asks this of you, find another charity. If you
don't formally sign your car over to the designated nonprofit, you will
be held responsible for any parking tickets that are subsequently
incurred, or liable if it's used in a crime. Remember, the charity you
give the car to will probably not use your car to deliver meals to the
needy, but will simply sell it as quickly as possible. When someone buys
it from them at auction and doesn't bother to register that car, it's
still yours in the eyes of the law.
7. Value Your Car CorrectlyDue to the
proliferation of car donations, the IRS became increasingly concerned
about how taxpayers valued the vehicles they donated to charity. Over
the last few years, the agency stepped up their audits in this area and
began to advocate for changes to the laws that govern such deductions.
With the passage of the American Jobs Creation Act of 2004, those
changes have come. Starting with your 2005 tax return, you will no
longer be able to deduct the published fair market value of vehicles
worth more than $500. Under the new rules, your deduction will be
determined once your car is sold and the charity sends you a receipt
indicating the exact amount your car garnered at auction.
8. Complete Your PaperworkIf your car is worth more than $500, you must complete IRS Form 8283 and attach it to your yearly taxes.
9. Use Fair Market Value (FMV) for the CarThere
are several exceptions which allow you to use the Kelley Blue Book or a
NADA guide, but you must use the FMV, not simply the highest value
listed for the year and make of your car. Use the FMV when:
- instead of selling the vehicle, the charity keeps and uses it,
- the charity makes improvements to the car before selling it,
- your car is sold at a discounted price to a person with a low income,
- or if the car is worth less than $500.
And remember to always get a receipt when you donate the car. Again, the IRS is watching this area very closely.
10. Take the Time to Get It RightIt is true that
the biggest winner in the car donation game is usually the donor, and
not the charity recipient. But if you take your time, ignore the quick
and easy television appeals, and find a reputable, high-performing
charity that will make the most of your donation, we can all emerge
victorious.