The ABCs of Car Donation – M is for Money

When you donate your car to charity, you will save a lot of money. First, you will save money at the car dealership. Most auto buying guides say you will be able to negotiate a much better price for a new or used car without a trade in.

Through car donation, you will save the money you would have paid to advertise the sale of your car either on the internet or through the newspaper. Also, if your car does not run, has a major mechanical problem or a lot of body damage, you may have to fix it in order to sell it for a decent price. Donating your car will save you the money you would have paid in repair costs. Also, you will not lose any money by having to take time off from work to show the car, fix it, etc. And, if your car is in really bad shape, you will not have to pay money to have a junk yard come and tow it away.

Most car donation charities will be quite happy to accept your car no matter what condition it is in. You will simply need to give them a valid title. When you donate your car to charity, they will pick up your car fast and free and at a time that is convenient for you. That will save you money on the unused part of your car insurance, registration, license plates, etc.

You will be eligible for a tax deduction of at least $500 when you donate car to charity. To claim your money saving tax deduction, you just need to itemize on your federal income tax return. In most cases, the charity you donate your car to will sell it. If they are able to sell it for more than $500, that sale price will become the amount you can claim as your tax deduction. Unlike many things in life, getting a tax deduction by donating a car to charity is not a gamble it is a sure thing.

The charity you choose to donate car to will use the money generated from its sale to help further their mission. They may use it to help fund research on a wide variety of illnesses or diseases. They may use it to provide information and services to those inflicted with aliments, or with mental illness. The proceeds might be used to provide counseling services, for education or for programs for young people. The money may even go to help fund services for wounded soldiers, veterans or their families. Some charities use the proceeds from the sale of car donations to help provide shelter, food and medical services to needy individuals or homeless animals.

When you donate car to charity, you save money in many ways and the charity is able to use the money generated from its sale in many ways too.  Car donation is a very good thing for your bottom line and for that of the charity as well.

The ABCs of Car Donation – G is for Good

There are good car donation centers and there are some not so good ones you can donate your car to. In 2010, the attorney general for New York State launched an investigation into several possible “scam” car donation charities in the New York City area. One car donation center was actually shut down because it used less than two percent of the money from car donations for charitable purposes.

You can easily find out whether the car donation charity you are thinking about donating your car to is a good one or not a good one. You can check them out through the attorney general’s office for your state. You can also check them out through the internet. With all of the really good car donation centers out there you can donate car to, there is no reason to choose any center that is not good.

Once you do find a good charity to donate car to, you will feel good about your decision. Your car donation will do a lot of good as well. If your donated car is in good condition, the charity may decide to use it themselves for their own charitable purposes. They may even decide to sell it to a person in need at a greatly reduced price or even give it them.

If your donated car is not in good condition, but is easily repairable the car donation center may repair it before they sell it. If your donated car is not easily repairable, the car donation center will sell it as it is. You can still feel very good about donating a car that is rusted or is basically junk. Since the price of scrap metal is up, the charity will be able to sell it for good money.

Most car donation centers sell all donated cars in the condition they are donated in. They do it because it is good for them. It is good for them because they do not have the expense of making repairs, they do not have any liability issues and they get the cash for the cars quicker. Improving their cash flow is a very good thing for the charity.

Another good thing about car donation is the good tax deduction you will get when you donate car. In general, your good tax deduction will be the amount the charity sells your donated car for or $500, whichever is more. However, if the charity uses your car, sells it to a needy person for an extremely low price or gives it to them, your good tax deduction will be the fair market value of the car.

There are a great many good things about car donation. You get rid of a car you no longer want or use. That alone is a good thing. The charity you donate car to will either put it to good use or get some good money for it which will help them do good things. You will also get a good tax deduction when you donate car. Car donation is truly all good.

B is for Beware

Beware of false claims.  Beware of any charity or car donation center that uses any of theses phrases; “full fair market value”, “maximum value”, “maximum deduction” “huge tax deduction”, “fully tax deductible” or “tax credit”.   First, there is no tax credit allowed for a car donation. The IRS allows a tax deduction.  A tax credit and a tax deduction are 2 completely different things. In order to claim a tax deduction, you have to itemize on your federal income tax return. This is generally known as “filling out the long form”.

The tax rules regarding the amount a donor can claim for a car donation changed effective January 1, 2005. If you donate your car to charity, the amount you can claim for your tax deduction depends on what the charity does with your car and the fair market value of your car on the day you donate car.

The fair market value is the amount you can reasonably expect to sell your car for in the open market in its current condition. Besides looking at local car ads, you can use several pricing guides to help you determine the fair market value of your car. Some of the more popular guides are the Kelly Blue Book, the National Automobile Dealers Association guide and the Edmunds guide. They all will help you determine how to value your car based on its condition, mileage and accessories. Use the figures for private party sales not the retail sales. Beware of over estimating the fair market value of your car. If you do and the IRS chooses to audit your tax return, you’ll not only lose part of your tax deduction, you may have to pay a penalty as well.

The other factor that determines the amount you can claim for your tax deduction when you donate car is what the charity does with your car. If the charity uses your car for their purposes, gives it or sells it a greatly reduced price to a needy person or makes substantial improvements to your car before selling it, you can claim the fair market value. These practices, however, are not the norm. Most charities sell car donations as-is. If the charity sells your car, you can claim the fair market value up to $500 or the amount the charity sells your car donation for if it is more than $500. IRS publications 526 and 561 will give you complete details on how to determine your tax deduction.

Beware of slick advertisements especially if you are concerned about how much of the proceeds the charity will get from the sale of your car donation. Radio and newspaper ads and billboards are very expensive. The donation centers that run these ads use a portion of the proceeds from car donations to pay for them.

Donating a car to charity can be a beautiful thing if you know how to avoid the pitfalls.