At Cars Donation, 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 recent 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 Donate Your Car 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 Donate Your Car
If 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 Respect
Remember 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 Charity to Donate Your Car
Worthy 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 Charity
The 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 Charity
Some 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 Correctly
With to the proliferation of car donations, the IRS became increasingly concerned about how taxpayers valued the vehicles they donated to charity. Not only did the agency increase heir audits in this area, but it also advocated for changes to the laws that govern such deductions. It succeeded with the passage of the American Jobs Creation Act of 2004 which prevented taxpayers from simply deducting the published fair market value of vehicles worth more than $500. Instead, the deduction is determined once a car is sold and the charity sends the donor a receipt indicating the exact amount the car garnered at auction.