Donating a Car
by Vinay Choubey
Across the nation, an increasing number of charities have turned to car-donation
programs in recent years as an effective way to raise money. And these programs, if well managed by the charity,
can offer significant benefits for the exempt organization and the taxpayer.
If you are considering donating a car to charity, there are a few aspects of the process you should be
familiar with. As a tax deduction, donating a car may or may not make good financial sense. However, if you are
truly interested in being charitable, then the tax deduction merely comes as an added bonus. Before donating a car,
make sure you are dealing with a reputable donation service or qualified charity.
Choose the Qualified Organization:
Taxpayers must make certain that they contribute their car to an eligible organization; otherwise, their donation
will not be tax deductible. Be sure to have the organizations correct name and its headquarters location, if
possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in
order to be qualified.
Calculate the real Market Value of your Car:
The donor must take many factors into consideration to establish the value of the car. Many used-car buying guides contain step-by-step instructions
so that readers can make adjustments to the value of a car for accessories, mileage and other indicators of
its general condition.
Direct Communication with charity:
Many donors also want to make sure their contribution is used for the charitable purpose they intend. The
Internal Revenue Services (IRS) urges donors to ask whether those soliciting the car donation are officials
of the charity itself or private fundraiser acting on the charitys behalf. If it is a private fundraiser, what will
it do with the vehicle? Will the car be fixed up and given to the poor and needy? Or will it be resold?
Deduct Only the Cars Fair Market Value:
Some car donation program operators have mistakenly claimed that donors can take the full 'Blue Book' value
of their car for a deduction. The IRS, however, will only allow a deduction for the fair market value of the car.
Fair market value takes into account many factors, including the vehicles condition. The fair market value
of the taxpayers car may be substantially different from the 'Blue Book' value.
Document the Charitable Contribution Deduction:
For vehicle donations, taxpayers must document the car donation and its fair market value. Recordkeeping
requirements are comprehensive and vary depending on the amount of the contribution and the total amount of the
charitable deduction.
Though donating a car may seem difficult, it is actually quite simple. The charity or donation service should be
adept at answering your questions and make it easy to complete the process. They will even arrange for pickup
through a towing company in your area.
In most cases, people donate vehicles to avoid the hassles of trying to sell or trade an old car or truck. If
your vehicle is not running, you arent likely to get any value from selling or trading it, but many charities
accept such vehicles, and you can take the tax deduction. Donating a car is fairly simple, a worthwhile
cause, and may benefit you more on your tax return than selling or junking it. For specific information regarding
tax laws, you can obtain a guide from the IRS online.
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