Car Donation and Tax Deduction

Donating vehicles to charity seems to benefit everyone involved. If you are the donor, you get a chance to dispose of your old car, do some good, and get a tax deduction in the process. If you used an agent, he would also make some money out of the sale of your car. Of course, the main benefactor is the charity. However, how much do they really benefit from car donations?

According to studies, charities usually receive as little as five percent or less of the reported value of a donated vehicle. Usually, this happens because of other deductions from the sale of the car used to pay for advertising, towing, improving the condition of the car and processing documents. Some charities also agree to take a flat fee for a donated vehicle no matter what its market value is.

If you are considering donating vehicles to charity, be careful in employing car donation agents. Many are out to assist you in donating vehicles to charity for the purpose of profit. Some devise ways on how to resell the donated car for much more after selling them at auctions for a meager amount.

What you can do is search for charities that accept vehicle donations without using the services of intermediaries. These charities will process the necessary paperwork for you. However, you should still practice caution when donating vehicles to charity directly. Many companies disguise themselves as charities soliciting car donations and eventually selling the donated cars and keeping the profits.

The prevalence of such frauds in car donation programs gave rise to new laws concerning donating vehicles to charity. The tax deduction that a donor will receive is limited to the gross amount that the charity received. Charities that sell donated cars should provide donors with a written notice containing the gross sale amount of the donated car if it is valued at $500 or higher. On the other hand, charities that use donated vehicles in their operations should provide the donor with a written guarantee of how the charity intends to use the car donation and for how long.

When donating vehicles to charity, you should always check that the organization is registered and legitimate. To ensure that your donation will truly benefit the charity, your best option is to donate your car to an organization that can make full use of it in their operations. Look for charities in your local area or ask them for help in locating charities that may have a need for an old car for transportation, deliveries and errands.

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