Hello and Welcome to Your Car Donations Blog, I hope you find the answer to your questions here.

Much is made every April about tax deductions, despite the fact that very few people use itemized deductions to account for donations of physical goods such as clothing, furniture or autos.  Tax deduction is further complicated by being discounted from your net income rather than the net tax owed.  In essence, this means that an average taxpayer receives about 30% of a given donation in actual tax relief, depending upon their tax bracket.

Though it still represented less than a single percent of actual charitable giving in the United States, boat and auto tax deductions were a growing and very visible component of charitable giving when the General Accounting Office (GAO) issued a report on this topic to the US Senate Committee on Finance in November of 2003.  At that time, fewer than 1% of the nearly 200 million tax returns filed in 2002 used an auto for tax deduction purposes.

Despite this relatively small amount of claiming, the GAO theorized that perhaps twice the number (about 700,000) of autos were actually donated.  This suggests that after the sale of said autos, tax deduction rules made many of the donations worth reporting.

Often this is the case when people are better served by taking the standard deduction or they simply don’t know how to go about with itemized deductions and don’t have the extra money to hire a professional tax preparation specialist.  Even when donating a fairly expensive auto, tax deduction limits that require signed forms (essentially affidavits of fair sale and donation) from the receiving agency may show a far smaller value than you thought the donated vehicle would be worth.

This is especially true of vehicles worth more than $5,000, though even those that net over $250 at auction require an acknowledgement of the donation from the charity in question.  Even when as little as $500 is received for an auto, tax deduction requirements require a form (IRS Form 8283, section A) to be filled out, though only the most expensive ones require a signed form from the donation agency.

The disparity between the price listed in such publications as the Kelly Blue Book and the actual sales value of a car is largely dependent upon how the vehicle is sold and by whom.  For instance, in 2002, a majority of charitable that accepted donations of vehicles were handled by third-party organization, even if the charity itself handled the initial contact calls.  Despite the high value of the auto, tax deductions are limited to the actual value received by the charity, and that can represent a small fraction of the original gift.

That certainly doesn’t mean you can’t make a significant donation with your old auto.  Tax deductions are certainly available, and for those who are accustomed to itemizing their deductions, such as small business owners and the self-employed, choosing this route can be both rewarding and profitable.

For instance, you don’t need to rely upon a third-party donation service, such as those who continually advertise in just about every type of media.  Indeed, when donating an auto, tax deductions are the same whether you give away the actual car or the money that you receive from its sale.  Selling the car yourself may be a bother, but you will reap as much as 20% greater deductions from such a cash gift.

There may also be charitable organizations in your area that have use of a running car.  Though a large number of cars donated to charity don’t run well or at all, many do run and can assist low-income families in spread out metropolitan areas that aren’t adequately served by public transit.  Such an auto, tax deduction aside, can really make a big difference for a family on the brink of making a living.  Your deduction will be higher, and you’ve made a real, tangible difference in someone’s life, assuming you didn’t donate a lemon.

One may also consider donating a car or truck to the local high school (or technical college) shop class, especially if it’s a fine car in need of a lot of work.  Even after the cost of materials for the auto, the tax deduction will be far higher when the car is eventually sold since the cost of labour need not be accounted for.

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There are many reasons people choose to use a facilitating or third-party service organization to manage their auto donations.  Indeed, they are often very similar to the reason a given charity might use such a third-party agent for auto donations.  When you’ve already got too much on your plate, it’s good to let a professional help out.

For consumers, it’s often a simple matter of wanting the vehicle gone because a new one has been purchased.  Sometimes it is the inherent bother and expense of hauling it away that makes people turn to professionals to handle their auto donations.

Of course, there are financial and charitable benefits to conducting such transactions yourself, but all auto donations are good ones as far as receiving charities are concerned.  Also, if using a service to manage your auto donations makes donation that much more likely, then such services serve a valid purpose.  As of 2004, nearly 70% of legitimate charities (determined to be non-profit by the IRS) used third-party agencies to manage their auto donations, though a similar amount did take their own inquiry calls.

As common as the practice is, there are some things you want to take into consideration when choosing a service to manage your auto donations for you.  For starters, you want to make sure the third-party management of auto donations actually benefits real charities.  This is often accomplished by calling the state Attorney General’s office or the state Secretary of State.

A large majority (39 of 50 states in 2004) of states require third-party agencies that handle auto donations to register with the state.  If the company you’re inquiring about isn’t on the rolls but is advertising their services in the state, an investigation will likely continue.  Feel free to ask for a copy of the legitimate list if you’re confused.  Many states carry this information online.

There are many types of charities that can benefit from auto donations.  In addition to the typical non-profit organizations as recognized by the IRS, schools, local or state governments, childcare organizations and veterans groups, in addition to the federal government itself are all eligible.  Not included as valid targets of auto donations are for-profit support groups, political groups or candidates, social clubs, co-ops, labour or agricultural groups, as well as just about any social group that isn’t covered by non-profit exemption.

Once you’ve chosen a charity and third-party agent for auto donations, you can get down to the business of actually sending the car off.  When inquiring about your vehicle a determination will be made as to whether it’s worth the effort of picking it up.  Though some charities will accept any vehicle, others are pickier about what they will or wont’ take, as some donations actually cost them money.  Those who do take all auto donations usually do so in an effort to generally encourage their donation base.

Even if your auto donation does run under its own power, it will almost always be picked up by a tow truck for liability reasons.  Whether the charity in question will be using the car as is, will repair it for sale or sell it directly on the wholesale market depends upon their needs and how quickly the turnaround on auto donations are expected.

Vehicles sold at wholesale auction, as many third-party auto donation agencies prefer, will usually generate a far lower value than you could have achieved if you sold it yourself.  This is generally important only if you believe the vehicle should be worth over $5,000.  In this case, you’ll have to get a receipt for the actual value of the car.  If it’s worth less, the “fair market value” of the vehicle may be estimated.

That said, if your car is worth less than what you paid for it, a third party group to handle auto donations may be a good choice as far as your allowable charitable deduction is concerned.  In the case of higher-end auto donations, you (and the charity in question) may be better served selling in some other manner and donating the resultant money to the charity directly.

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When one has a car that is a good candidate for automotive donation, there are very often time constraints that don’t allow for a great deal of shopping around for the most needy individuals in the community, much less, repairing and making that vehicle a useful donation.  An authorized vehicle donation center, recognized by charitable organizations and the IRS, will be able to take care of your vehicle, find it’s best and most charitable use and give you a verifiable receipt for your tax forms.

But, how do you know your vehicle is being used for the charitable purposes the supposedly authorized vehicle donation center claims to support?  There are several signs, especially when you’re looking online for such a service or responding to solicitation, that you’re dealing with a non-authorized vehicle donation center.

A quick check with even one or two of the charitable organizations (preferably ones you’ve heard of before) should yield an acknowledgement of the authorized vehicle donation center’s association as an agent of that charity.  Any legitimately authorized vehicle donation center will be able to provide you with a list of charities it brokers deals for.

Though very few authorized vehicle donation centers are registered with the IRS as a 501 (c)(3) non-profit organization, the charity you donate to must be.  Without this badge of approval from the tax authorities, you’ll not be allowed to legally take the deduction.  Even worse, this can set you up for an audit and no one wants to mess with that kind of attention.  A truly authorized vehicle donation center will be able to provide you with their tax ID number so you may check it on the IRS website.

Several states additionally certify authorized vehicle donation centers on their own.  If your state is one of these, you can easily check with the state attorney general’s office to see if the donation center you’re considering is listed on the state non-profit rolls.  If not, you may not be dealing with an authorized vehicle donation center at all.

The authorized vehicle donation center is most often, in fact, over 95% of the time, a for-profit venture.  The donation center must follow certain rules of conduct with regards to how you may be enticed into vehicle donation.  There is also a register of organizations that are not allowed to do business in the state.

One very important function of an authorized vehicle donation centers is helping you determine a fair donation value for your donated car, truck, boat or RV to be reported to the IRS.  This is not the so-called “blue book” value but, instead, its value on the market.  Bear in mind, this market may be wholesale rather than retail.

Most often, the value you’ll be given a receipt for is the value the charity ultimately receives for the car.  If you don’t receive a receipt suitable for tax purposes right away, that’s o.k., but if you’ve not heard anything in a few months, you should start making phone calls to the authorized vehicle donation center’s offices.  If the car is being repaired before sale, it could take awhile, though even authorized vehicle donation centers very rarely do that, preferring the wholesale and scrap methods.

This is especially true in the case of vehicles that are not currently running.  However, there is still money to be made, and most legitimate and authorized vehicle donation centers will be happy to come and haul your old car, truck or boat away for free.  You should be suspicious of any supposedly authorized vehicle donation center that would require you to pay for towing services and ask.

If the fair value of your car is less than $250, there is no reason to bother with a form of donation from your chosen charity or a third-party organization such as an authorized vehicle donation center.  However, over that amount, you’ll need a receipt in writing.  If more than $5,000 is received for your vehicle, you will require an additional form (Form 8283, section B) to be signed by a representative of the authorized vehicle donation center in question and an independent appraisal.

Though there are certainly charlatans out there who would take advantage of charitable giving to line their own pockets, the IRS and state governments take this very seriously.  The state Attorney General’s office will have a list of known scammers to avoid.  Once you know the  authorized vehicle donation center you’ve chosen is on the up and up, you can donate with peace of mind.