Tips before you donate a car to charity

Make sure the charity is an organization that you know and trust. There are thousands of organizations that accept car donations. Before you choose to donate, remember that all charities are not created equal. Look for an organization whose work you recognize as benefiting the community or the world. Be concerned about “charities” that have cute-sounding names or might sound similar to a charity you know (for example, Habitat for Humans instead of Habitat for Humanity).

 Ask how much the charity will receive. The charity has a responsibility to best manage your vehicle donation. Ask how much of the gross proceeds will go back to the charity after you donate a car to them. If the organization will only list the percentage of net proceeds, then your car donation could be largely wasted. Several published reports have clearly established that most car donation programs return between 15 and 35% of the gross back to the charity, but they report it as 50 to 70% of the net. This could be the difference between the charity of your choice receiving $1,000 or $150 for your car donation.

Car Donation Wizard returns between 75% and 80% of the GROSS from each auto donation back to the charity.

  Once you've decided to donate a car to charity, sign the title directly over to the charity or their agent. All states have very clear regulations about transfer of ownership for vehicles. DO NOT, UNDER ANY CIRUCUMSTANCES, LEAVE THE ‘BUYER’ SECTION OF THE TITLE BLANK. By leaving the title blank, you allow anyone to transfer the title directly from you to the next buyer. There are two consequences of this oversight.
        - The donor can remain liable for the vehicle. This means liable to the buyer and possibly liable for the actions of the buyer if the vehicle is never correctly transferred.
        - The charity might not receive any credit for the vehicle donation. By signing directly to the charity or their legal contractual agent, you make it much more likely that the vehicle will actually be used for the charitable purpose that you designate.

Ask how your car donation will be handled. You'll want to know that the vehicle will be picked up and transported by properly licensed and insured towing companies and that the legal transfer of the donated vehicle will be handled by a licensed dealer contracted by the charity.

Ask how and where the money will be spent. This question should be easily answered. You should search for the charity or agency that makes the best use of the funds from your auto donation. BEWARE of charity car donation programs that promise to send proceeds to any organization without having a direct relationship. All charities are not created equal, and all car donation programs are not run with the same attention to donor wishes.

Source: Car Donation Wizard

How To Donating Your Car

  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. 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 car donation 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 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 Car Donations
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
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.

8. Complete Your Paperwork
Non-cash donations are the most common triggers of audits, so it is important to keep thorough documentation of a car donation. Specifically, if your car is valued over $250, then you need to obtain and retain a written acknowledgement from the charity. Additionally, if your car is worth more than $500, you must complete section A of the IRS Form 8283 and attach it to your yearly taxes. Furthermore, if your car is worth over $5,000, then you must have an independent approaisal and fill out section B of IRS Form 8283.

9. Use Fair Market Value (FMV) for the Car
There are several exceptions which allow you to use the Kelley Blue Book or a NADA guide, but you must use the FMV, not simply the highest value listed for the year and make of your car. Use the FMV when:

• instead of selling the vehicle, the charity keeps and uses it,
• the charity makes improvements to the car before selling it,
• your car is sold at a discounted price to a person with a low income,
• or if the car is worth less than $500.

Otherwise, you can only deduct the amount that the charity sells the car for at auction as indicated on the written receipt the charity sends you.

10. Take the Time to Get It Right
It is true that the biggest winner in the car donation game is usually the donor, and not the charity recipient. But if you take your time, ignore the quick and easy television appeals, and find a reputable, high-performing charity that will make the most of your donation, we can all emerge victorious.

For more information, please see IRS Publication 4303, A Donor's Guide to Vehicle Donations.

Source: Charity Navigator

Car Donation

Car donation is the giving away no-longer-wanted automobiles or other vehicles to charitable organizations. In the United States, these donations can would provide a tax benefit.

Although advertised as an easy way to dispose of an old car, donors need to fulfill certain post-donation requirements to qualify for the tax deduction, such as obtaining a written acknowledgment of the car's subsequent sale by the charity, and must itemized tax returns instead of taking the standard deduction.

For vehicles valued at less than $500, the deduction amount comes from the donor's own estimate of the car's value, even if the charity receives less money from its sale. Deductions greater than $500 are limited to the proceeds of selling the vehicle, usually at auction. The rules for determining the amount that a donor may deduct for a charitable contribution of a qualified vehicle, including an automobile, with a claimed value of more than $500 changed at the beginning of 2005 as a result of the American Jobs Creation Act of 2004. In general, that Act limits a donor’s deduction to the amount of the gross proceeds from the charity’s sale of the vehicle.

For vehicles valued at over $500, taxpayers are required to attach the charity's written acknowledgment to their tax return.

Vehicle donations in America are operated in a wide variety of plans, ranging from highly organized and professional-grade not-for-profit, national, or local charities to scrap yards, haulers, tow-truck companies and salvagers who establish programs that may support a charity. According to Charity Navigator, the guidance of the rating agencies concerning car donation programs, where the charity receives a flat fee for the use of their name by a third party, versus program management by a third party,there are some questionable companies who contract to use a nonprofit’s agencies name and logo to raise funds and then just give them a flat fee unrelated to income or performance. This is frowned upon by rating agencies and the government. However, a percentage return program is viewed positively if the nonprofit receives more than 50% of the generated income. Programs that engage a third party, but with a "cost maximum cap" involved, such as with national charities like the Society of Saint Vincent de Paul, performance in this area is exemplary, with 70-80% on average being returned to the nonprofit.

Many charities run donation programs. All of them accept car donations, such as Goodwill, Salvation Army and even the American Cancer Society. Many charities will use your car donation directly to transport volunteers and supplies to areas that need help. Some even have their own car lots which sell the donated cars but many have their donations processed through auto auction companies. Many processing companies also collect and sell donated cars and distribute the money to a charity the donor indicates. The processing company typically takes a percentage of the sale value of the car, but these programs allow charities without their own facilities or staff dedicated to fund raising to benefit from vehicle donation programs.

Ideally, donors should also investigate how much money from the sale of the car goes to the auction processor and how much actually benefits the charity's programs, as opposed to its administrative overhead.

Car Donations: Taking Taxpayers for a Ride

Car donations to charities seem like a win-win proposition. A donor gets a hassle-free way of disposing of an old car and a fat tax deduction, a charity gets money that it would not otherwise receive through cash contributions and a middleman makes a tidy profit for soliciting, towing and selling the car. Unfortunately, the loser is the rest of us. As taxpayers, we are subsidizing tax deductions on car donations that are not anywhere near commensurate with the benefits received by charity.

A November 2003 United States General Accounting Office (GAO) study, for which AIP was

interviewed and listed as a resource, found that two-thirds of 54 cases studied the charity received 5% or less of the value of a donated car declared on an individual's tax return. Why so little? The car is often sold at auction for wholesale, then the cost for advertising in the newspaper and on the radio and Internet is subtracted. After the costs of towing and conditioning the car and processing the paperwork is deducted, little may be left for charity. Additionally, some charities may receive a flat fee for each car donated regardless of the value, sometimes as little as $25 per vehicle. The GAO could not determine whether donors were inflating the value of the used car. But it would be easy for donors to do so due to the lack of available information on the car's condition.

Car donations are a popular vehicle for tax deductions. 733,000 of the 129 million forms filed in the tax year studied (2000) claimed $654 million in deductions for used cars valued over $500. About 4,300 charities with revenues over $100,000 utilize car donations. The GAO study found wide ranging valuations and percentages going to charity: a 1990 Mercury Station Wagon was valued on an individual's tax return at $2,915, sold for $30 gross and after expenses the charity lost $130; a 1991 Ford Crown Victoria was valued on an individual's tax return at $3,100, sold for $300 gross and after expenses the charity received $165; and a 1995 Toyota ½ ton pickup was valued on an individual's tax return at $4,999, sold for $1,800 gross and after expenses the charity received $1,290.

At a June 2004 Senate Finance Committee hearing, a confidential witness who works in the auto sales industry described ways in which middlemen can make a profit from donated cars at the expense of the charity. In a practice the witness described as "fixing cars," some middlemen purposely disable cars, by simple techniques such as pulling a fuse or turning the distributor cap, so that they can be purchased for very little at auctions or used car lots and then resold for what the car was originally worth. The donor is rarely contacted about the vehicle's condition, according to the witness. The witness gave two examples in which a charity received less than $300 for a car that was worth about $4,000.

Some state attorney general offices have filed suits against car donation program operators, according to the GAO report. A for-profit business was parading as a charity that solicited cars before Massachusetts State officials shut it down. In 2003 Connecticut's Attorney General filed suit against the Animal Health Care Fund, a fake animal protection charity created by the owner of a used car dealer, who kept nearly all of the car donation proceeds and maintained one checking account for both entities. The California Attorney General's office filed a suit against an individual with a used car lot that incorporated a charity without any charitable programs and estimates that it raised over $1 million.

In response to out-of-control donated car programs, Congress in 2004 passed legislation to limit "Guides for Donating a Car to Charity".

taxpayers' deductions for donation of cars, trucks, boats or planes to the gross proceeds received by the charity. People donating vehicles worth $500 or more to charities that sell or auction the vehicles need to receive a written notice from the charity with the gross proceeds of the sale and stating that it was "sold in an arm's length transaction between unrelated parties." If the charity uses the donated car in its programs, the donor will need to receive written certification from the charity of the intended use or improvements related to use of the vehicle and the planned amount of time of intended use. The charity must also certify that it will not sell or exchange the vehicle before the planned period of time for its intended use or improvement. See

AIP regularly encourages donors to give cars to charities that can utilize the car in its programs, e.g. delivering meals to the homebound, taking elderly or blind people to the doctor or on errands, training future auto mechanics, etc. By doing this, vehicle donors can be confident that the full value of their contribution is benefiting charity. We recommend that people contact their local United Way, Goodwill, Salvation Army, community college or vocational school to locate programs that need donated vehicles.

Source: Charity Watch

Guides for Donating a Car to Charity

A charity that uses a donated vehicle for transportation or hauling goods obviously benefits directly from such a donation. However, in many cases donated cars will be sold en masse, either by the charity itself or by a dealer to raise funds for the charity. In the case of a dealer, the charity generally receives a flat fee per car, sometimes as little as $45 per car.

Listed below are tips for donors who would like to donate a car to charity. Beware that the donor's tax deductions for car donations may be limited to the price at which the charity sold the car.

• To receive the maximum tax deduction on your car donation, and to receive the satisfaction that the full value of the car benefits a charitable purpose, give it to a charity that will use the vehicle in its operations or will give it to a person in need. Otherwise, your tax deduction will not be based on the fair market value, but will be limited to the amount of money the charity receives from the sale of your car. If the charity you are donating to does sell the vehicle, ask what percentage of the proceeds they receive

• Ask if the charity accepts car donations directly, without involving a third party. If possible, drive the vehicle to the charity instead of using a towing or pickup service. This will allow the charity to keep the full amount of any proceeds from selling the car.

• Make sure the charity is eligible to receive tax deductible contributions. Ask for a copy for your records of the organization’s IRS letter of determination which verifies its tax exempt status.
   
• Be sure that you get a receipt from the charity for your car donation.
   
• Be aware that non-cash donations are one of the most common triggers to an audit by the IRS, so you’ll want to document the value of the car and keep records of it.

• If the car is worth more than $500, the donor must complete Section A of IRS Form 8283 and attach it to their tax return. Donors are required to file with his/her tax return a written acknowledgement from the charity. If the charity sells the car, the charity must provide the donor with a certification that the car was sold at "arms length" between unrelated parties and the sale price of the car within 30 days. In this case, the donor's tax deductions will be limited to the total amount the charity sold the car for. If the charity does not sell the car, it must provide the donor with a receipt within 30 days of the contribution. The charity may also be required to provide certification to the donor stating how it plans to use or improve the car and stating that it promises not to sell or transfer the car. Penalties are imposed on charities that provide fraudulent acknowledgements to donors.
   
• If the car is worth $5,000 or more, an independent appraisal is necessary. The donor must also fill out Section B of IRS Form 8283. For cars worth less than $5,000, use the Kelley Blue Book, the Hearst Black Book, or a guide from the National Auto Dealers Association (NADA) to determine the market value. Make sure you use the correct figure for the date, mileage, and condition of your car. Picking the highest figure for your car model and year without taking into account other factors may not pass muster with the IRS.
   
• Take pictures of the car and save receipts for new tires or other upgrades to verify its value.
   
• Remember, it is the donor, not the charity, who is obligated to value the car and who will pay the penalties if an IRS challenge finds your figure inaccurate.

Source: Charity Watch