Used Car Donation worth the cause?

I am not against donating used cars to a Charity program and in fact I contribute every year to charities. Not just because of religious reasons, but I think it is the right thing to do. Charity is for the greater good and the best thing in your life that can give you peace and sense of fulfillment. However for many, selling the car themselves and donating the cash could work out better as compared to donating their used car. If you don’t have time or the skills to sell, go head with the car donation route. Let me explain why you can do better on donating cash to charity. Because of several reasons. First, the average car donation value is less than 1500$. Typically we are not donating a car in good condition that can be used by some one.

We donate it when it is almost broken. So the charities are left with the option of selling the cars to auction houses for a fraction. Secondly, many people think they reduce the taxes directly by the amount they donate. Wrong. Understand that you don’t reduce the donated amount directly from the the taxes you pay. It is only your Taxable income that goes down and in turn indirectly the taxes. Third in many cases when you donate, it is the intermediate car auctioneers who get the benefit. Not you or the charity.

Program Efficiency of Used Car Charities

Charity Navigator data reports that 7 out of 10 charities they’ve evaluated spend at least 75% of their budget on the programs and services they exist to provide. And 9 out of 10 spend at least 65%. This means Charities demonstrating such gross inefficiency spend most of the proceed (75%) from the donors for their operational expanses. So if you donate a car that is worth, say 300$, only 75$ reaches the needy

Look at the decision table below. You will understand the facts. The important message here is, when you are thinking of your used car donation , make sure it is an excellent condition. There are multiple benefits to this. First, by donating a car when it is in good condition, you are helping a the needy to get what they need. Please understand, if you donate a junk car, it ends up in auction and does not go to the needy. Second, most importantly, you get can get a excellent deduction in taxable income almost close to the fair market value. The result is that you get the satisfaction of helping both the charity and reducing the tax. The point is, if your car is in great condition, you can donate it to a charity used car donation program that will use the car instead of selling it. If you have time and sale skills, your most flexible option is to sell it to a private party and contributing the cash to the charity. This way you decide how much to give it to the charity and how much you want to keep it for yourself

For further explanation of the above four options, visit the page on the used car donation program

Know the IRS 501 (C) rules on used car donation

IRS changed the rules recently on the documentation required for claiming tax deduction for the used car donations. There is a $500 limit on the receipts required. Also read and understand the IRS terms ‘Intervening use exception’ and the ‘Material Improvement exception’ by visiting the page IRS Rules. Visit IRS website and download Donor’s guide To Car Donations Publication 4303 (Rev. 03-2008).

Used Car Donation tips and Buying new car

The donated car benefit to the charity can vary quite considerably depending on the arrangements. In some cases, the full amount of the donation goes to the organization if the charity sells the car itself or uses the vehicle to help fulfill some program services need (for example, delivering meals to home bound individuals). If a third-party broker is involved, however, the charity may receive only a percentage of the resale price of the car (such as less than 20%) or it may receive a portion of what is left after all the expenses have been paid by the broker, which can result in even smaller amounts going to the charitable cause. To verify that a charity is eligible to receive contributions deductible as charitable gifts, you can do one or more of the following. See if the organization is listed in IRS Publication 78, the Cumulative List of Organizations, which is likely to be available at most large public libraries. Visit the online version of IRS Publication 78 at http://www.irs.gov/app/pub-78/. Or, ask the organization for a copy of its tax exempt status determination letter. (Note that churches are not required to apply for exempt status, and may not have such a letter or be included in the mentioned IRS publication. A car donation to a church, however, would still be deductible.)

Used Car Donation Checklist

  • Verify that the recipient organization is tax exempt as a charity.
  • Make sure the title of the car is transferred to the charity’s name and keep a copy of this record.
  • Find out how the charity financially benefits from the resale of the car.
  • For tax records, take a photo of the car and keep copies of current classified ads or guide value estimates for similar vehicles. (For more deductibility information, get a copy of IRS Publication 561, Determining the Value of Donated Property.)
  • If the car is worth more than $5,000, get a written professional appraisal.
  • Check out the charity with the Better Business Bureau serving your area.
  • Find out if the charity is properly registered with the government agency in your state that regulates charities (usually a division of the state’s office of the attorney general).

When you donate used car to a charity car program, not only you help as well as save taxes, you can also enjoy the safety and Technological advancement that is available in new cars today. You could consider buying a smart car. Smart cars are easy to park, highly fuel efficient  and highly eco friendly. Read about the New car safety features and Technological advancement in Cars here why donate?

Eliminating Risks

Understand how you can make sure that you don’t get into unnecessary issues while donating your vehicle to the charity. Visit the page  avoiding risks