Whether you're a prospective donor or a charity that has just been given an offer you can't refuse, you'll want to go out of your way to inspect a donation car for safety as well as functionality. Ideally, as a donor, you have a pretty good idea about the true condition of your car and what it needs to be safe for travel.
Sometimes this can involve a bit of work, but if you know exactly what needs to be performed, it might make the task seem a bit less daunting. Since you've probably taken the car in for evaluation before deciding to switch to a different one, you have a pretty good chance of knowing what's going on with your donation car before you even dial up your favorite charity.
Of course, if it's been sitting out for awhile, you'll want to make sure it at least does as much as it did before you set it aside. In many climates, fuel left in the gas tank for more than a few months, without some sort of treatment beforehand, can result in a gumming up of the engine (the fuel vapors actually turn to varnish on the formerly moving parts) that takes a great deal of time and labor to overcome.
This sort of malfunction that requires a great deal of time and effort to correct, rather than a bunch of money, is a good candidate for a charity program that teaches people about auto service as part of the charitable mission. If the donation car also happens to be in good shape otherwise, the odds of such an automobile being repaired and given away are pretty good, especially if you're working with a local non-profit directly.
Of course, if you live in a state where you must pass emissions testing to purchase your registration tags (or new plates), you want to check to see if donation is a car that's even legal to drive without further work. It is unfortunate that so many of the cars given to charity are gas guzzlers when the price of gas goes up. Regardless, you can at least make sure they're not spewing fumes.
You should check to make sure all the lights work, the battery can take a charge, and there's at least some rubber on the tires. Generally you want to make sure if there's anything wrong with your donation that could cause someone who has enough problems to be very seriously inconvenienced with your donation. A car mechanic that works for a charity or a class of students will be going over a list of their own, but it's good to let the charity know just what they're getting into when you call so they can make a decision.
Of course, it's good to know that the breaks are intact and that the accelerator doesn't stick. Again, this has a major impact on how the charity (or third-party agent) will ultimately use your donation. Cars that have very little value or are dangerous in some way, are very often sent to the wholesale market as parts cars. Again, it's important you not keep information that could endanger anyone's life to yourself.
As for the real-world functionality of your donation, a car must also have a free and clear title to be transferable. In some states you can request a duplicate title be sent to you in the mail, though it sometimes takes several weeks to get the process rolling along with a call for a tow truck.
When you call to begin the process of donation, a car and truck specialist will get a good idea for what needs to happen to your car. If it's decided based upon the condition and usefulness of the car that it should be saved, a charity that will return it to good working order. Otherwise, you can expect to to become parts. Rarely are cars simply crushed for their metal, though this is sometimes done in severe cases.
Monday, December 29, 2008
Saturday, October 11, 2008
Charities to Whom You May Donate Automobile Parts and Broken Autos
Since the revamping of the laws regarding vehicle donation, automobiles that are not running have been donated at a somewhat lower rate than they were just a few years ago, but that doesn't mean you're stuck with that jalopy. You can still donate it to charity even if the tax deduction benefit has been slashed dramatically.
Generally when you donate an automobile that doesn't run, it will be towed away and sold essentially as a parts car. Though most donated automobiles in such condition are dealt with by a third-party (usually a for-profit company) agent rather than the charity itself, you can still get the old hulk hauled away.
However, you should be aware that the deduction value you may claim for a car sold on the wholesale market is greatly limited by the fractional amount it is likely to be sold for as well as the overhead fees that are taken off the top by a third-party agent, the remaining value that is actually given to the charity from the sale of the donated automobile is the extent of what can be written off under the new laws.
Generally, the highest values for donated automobiles are reserved for cars and trucks that are still running, some agencies will accept some broken down cars and trucks for repair. If you can find a school or church that has an ongoing mission of automotive training, even a non-functional auto has the potential to be deducted at the higher “fair market value” in such cases.
When you donate an automobile to a charity or non-profit organization recognized by the IRS as a charitable organization, it won't be your job to part it out and sell the pieces. Someone will do that for you after they purchase the whole thing, parts and all. On the other hand, if you don't have all the parts anymore, as long as it still looks something like a whole automobile, you'll be able to give it away as such. No one is going to be counting each and every bolt to make sure it's still there, nor do you have to sign any sort of affidavit that your donated automobile is repairable.
So, reagardless of how profoundly it's not running, donated automobiles are still accepted by a wide range of charitable organizations. Often, they will be larger or national charities that don't have a specific mission involving getting running cars to people. Unless there's something particularly cool or somehow unique about your donated automobile that would make it a good project car, you can assume that it will be sold for scrap or parts at a wholesale auction.
If the donated automobile is special, you might want to shop around and find someone who will take the time to put it back into working order. Schools that teach shop classes and other non-profits with an educational mission are the most likely to want to put the time and effort into getting your mangled '65 Thunderbird into saleable condition. Though it could take some looking on your part, there are charities available who will come and pick such a donated automobile away.
This approach has the added advantage of providing you with the opportunity for a higher resale and thus, tax deductible value. Of course, it will take a little longer, and you may end up waiting a few months before you finally get the paperwork declaring what your donated automobile was sold for – or the use it was finally put to – within 30 days of the final sale or determination.
Donated automobiles, regardless of how long it takes them to actually find their ultimate end, will be given a receipt of intent when they're picked up. This means that even if it takes awhile for the donated automobile to become a running machine again, you have the ability to go ahead and file your taxes for the year in which the donation process was initiated.
Despite changes to the law, there are still plenty of places that accept donated automobile that are no longer running. The only thing you need to consider is whether or not it has potential to be fixed up for sale as a running machine.
Generally when you donate an automobile that doesn't run, it will be towed away and sold essentially as a parts car. Though most donated automobiles in such condition are dealt with by a third-party (usually a for-profit company) agent rather than the charity itself, you can still get the old hulk hauled away.
However, you should be aware that the deduction value you may claim for a car sold on the wholesale market is greatly limited by the fractional amount it is likely to be sold for as well as the overhead fees that are taken off the top by a third-party agent, the remaining value that is actually given to the charity from the sale of the donated automobile is the extent of what can be written off under the new laws.
Generally, the highest values for donated automobiles are reserved for cars and trucks that are still running, some agencies will accept some broken down cars and trucks for repair. If you can find a school or church that has an ongoing mission of automotive training, even a non-functional auto has the potential to be deducted at the higher “fair market value” in such cases.
When you donate an automobile to a charity or non-profit organization recognized by the IRS as a charitable organization, it won't be your job to part it out and sell the pieces. Someone will do that for you after they purchase the whole thing, parts and all. On the other hand, if you don't have all the parts anymore, as long as it still looks something like a whole automobile, you'll be able to give it away as such. No one is going to be counting each and every bolt to make sure it's still there, nor do you have to sign any sort of affidavit that your donated automobile is repairable.
So, reagardless of how profoundly it's not running, donated automobiles are still accepted by a wide range of charitable organizations. Often, they will be larger or national charities that don't have a specific mission involving getting running cars to people. Unless there's something particularly cool or somehow unique about your donated automobile that would make it a good project car, you can assume that it will be sold for scrap or parts at a wholesale auction.
If the donated automobile is special, you might want to shop around and find someone who will take the time to put it back into working order. Schools that teach shop classes and other non-profits with an educational mission are the most likely to want to put the time and effort into getting your mangled '65 Thunderbird into saleable condition. Though it could take some looking on your part, there are charities available who will come and pick such a donated automobile away.
This approach has the added advantage of providing you with the opportunity for a higher resale and thus, tax deductible value. Of course, it will take a little longer, and you may end up waiting a few months before you finally get the paperwork declaring what your donated automobile was sold for – or the use it was finally put to – within 30 days of the final sale or determination.
Donated automobiles, regardless of how long it takes them to actually find their ultimate end, will be given a receipt of intent when they're picked up. This means that even if it takes awhile for the donated automobile to become a running machine again, you have the ability to go ahead and file your taxes for the year in which the donation process was initiated.
Despite changes to the law, there are still plenty of places that accept donated automobile that are no longer running. The only thing you need to consider is whether or not it has potential to be fixed up for sale as a running machine.
Friday, October 10, 2008
Protect Yourself From the Alarming Rise in Fraudulent Car Donation Programs
According to the General Accounting Office's (GAO) 2003 report to the Senate Committee on Finance, the incidence of mis-reporting from car donation programs was out of control. In 2005, some changes were made to the rules that govern car donations and the subsequent deductions that are allowed.
However, the report also showed that an alarming 95% of third-party agents that facilitated the donations for perfectly legitimate charities and non-profit organizations (NPOs) were for-profit organizations that ate up as much as 70% (and sometimes even more) of the profits from the sale of donated automobiles. This means that a very paltry amount of the proceeds from such sales were actually reaching the charities.
Since the 2005 changes took effect, the previously very lucrative business of selling donated cars for IRS authorized charities that didn't have in-house resources for dealing with automotive donations, has become somewhat less profitable. As such, the proportion of third-party car donation programs that operate for profit has declined.
That doesn't mean you don't have to be diligent about the type of car donation programs you look into when deciding to donate a used car to charity. There are still several states (many of them in the Western United States) that don't require such car donation programs to register with the state Attorney General's office. If you live in one of these states, you'll have to be very careful about the ultimate use of your car, since the amount you'll be able to legally deduct without attracting the attention of auditors is tied its use.
For starters, you should check all car donation programs to see that they are actually representing charities and non-profits that are sanctioned as charitable organizations by the IRS. If in doubt, ask someone at the charity in question how their relationship with the third-party agent works. If they are not in control of the program, there could be room for citing exorbitant overhead costs, despite increased regulation of such overhead costs since 2005.
Car donation programs should be able to give you a good idea of how the donated car will ultimately be used. Your benefit in the form of allowed deductions will be higher if the car is to be used by the charity itself (such as is the case with Meals on Wheels) or given to a needy family that needs reliable transportation. If this involves fixing the car up before being given away, the value of the repaired car may be deducted.
It also behooves a donor to inquire as to how the vehicle will be rehabilitated. Car donation programs that are known for performing such repairs as part of an educational mission will make it especially easy for you to claim the fair market value of the car, even if it is eventually sold to someone (such as one of those needy families) at a deeply discounted rate.
If one of the car donation programs you've chosen doesn't seem to be forthcoming with answers to your questions, check with the state Attorney General or other organization that is responsible for monitoring such agents. Even in a state without such oversight, some private organizations, such as the Better Business Bureau, have their own lists of reputable car donation programs that may be better able to serve your charitable desires. Indeed, this might be the best place to begin your search.
It is also useful to note that all car donation programs are required to give you a receipt within 30 days of picking up your car, though the receipt of sale is what you will actually use to value your donated automobile for deduction purposes. If the charity in question will be spending some time fixing the car up or using it for their own charitable purposes, you should still expect some paperwork to that effect. If you don't get it within a month of your car donation, you should call to check up on the status of your receipt.
It has become far easier to check on the charitable mission of car donation programs in recent years. A little bit of homework on your part will help you avoid unscrupulous car donation programs that have little, if anything, to do with the charities they claim to represent. Check twice and donate once.
However, the report also showed that an alarming 95% of third-party agents that facilitated the donations for perfectly legitimate charities and non-profit organizations (NPOs) were for-profit organizations that ate up as much as 70% (and sometimes even more) of the profits from the sale of donated automobiles. This means that a very paltry amount of the proceeds from such sales were actually reaching the charities.
Since the 2005 changes took effect, the previously very lucrative business of selling donated cars for IRS authorized charities that didn't have in-house resources for dealing with automotive donations, has become somewhat less profitable. As such, the proportion of third-party car donation programs that operate for profit has declined.
That doesn't mean you don't have to be diligent about the type of car donation programs you look into when deciding to donate a used car to charity. There are still several states (many of them in the Western United States) that don't require such car donation programs to register with the state Attorney General's office. If you live in one of these states, you'll have to be very careful about the ultimate use of your car, since the amount you'll be able to legally deduct without attracting the attention of auditors is tied its use.
For starters, you should check all car donation programs to see that they are actually representing charities and non-profits that are sanctioned as charitable organizations by the IRS. If in doubt, ask someone at the charity in question how their relationship with the third-party agent works. If they are not in control of the program, there could be room for citing exorbitant overhead costs, despite increased regulation of such overhead costs since 2005.
Car donation programs should be able to give you a good idea of how the donated car will ultimately be used. Your benefit in the form of allowed deductions will be higher if the car is to be used by the charity itself (such as is the case with Meals on Wheels) or given to a needy family that needs reliable transportation. If this involves fixing the car up before being given away, the value of the repaired car may be deducted.
It also behooves a donor to inquire as to how the vehicle will be rehabilitated. Car donation programs that are known for performing such repairs as part of an educational mission will make it especially easy for you to claim the fair market value of the car, even if it is eventually sold to someone (such as one of those needy families) at a deeply discounted rate.
If one of the car donation programs you've chosen doesn't seem to be forthcoming with answers to your questions, check with the state Attorney General or other organization that is responsible for monitoring such agents. Even in a state without such oversight, some private organizations, such as the Better Business Bureau, have their own lists of reputable car donation programs that may be better able to serve your charitable desires. Indeed, this might be the best place to begin your search.
It is also useful to note that all car donation programs are required to give you a receipt within 30 days of picking up your car, though the receipt of sale is what you will actually use to value your donated automobile for deduction purposes. If the charity in question will be spending some time fixing the car up or using it for their own charitable purposes, you should still expect some paperwork to that effect. If you don't get it within a month of your car donation, you should call to check up on the status of your receipt.
It has become far easier to check on the charitable mission of car donation programs in recent years. A little bit of homework on your part will help you avoid unscrupulous car donation programs that have little, if anything, to do with the charities they claim to represent. Check twice and donate once.
Monday, September 15, 2008
Beware: Car Donations Can Sometimes Increase Your Taxes!
There Are Some Special Situations Where Taking Car Donation Deductions Can Actually Increase Your Tax Bill
Not all car donation deductions are created equal – there are even cases where donating an auto in good faith can actually increase your tax owed under certain circumstances. Like anything else involving the IRS, the burden of proof is upon you, so the more information and documentation you have to back up your car donation deduction, the better.
Thankfully, just as rules have tightened up for donors, the onus of documenting the ultimate use or destination of a donated car rests with the charity receiving your car donation. Deductions are now tied to the ultimate use of the vehicle. So, if the charity you choose or, the third-party (often for-profit organization) that acts as an intermediary between yourself and said charity, sells your car at a loss, you'd have a hard time claiming fair market value for such a donation.
The charity is required to give you a receipt stating the use of the vehicle within 30 days of donation, whether it's actually met its final fate yet or not. If it is used and later sold, you'll receive a new receipt outlining this use, too.
On the other hand, if the charity you choose has a mission that includes using the donated vehicle to further their mission or they sell it at a loss to a needy family, you may still claim the “fair market value.” This may, however, get your return some unwanted attention that you may not welcome for other reasons. If this doesn't sound like a good idea to you, it may be wise to consider something other than car donation for deduction purposes.
Indeed, it pays to be careful of who is receiving your donated auto. This is especially true in the case of car donations and deductions taken from charities that are not recognized as non-profit organizations by the IRS. This is easily checked, and doing so can save you a great deal of heartache later. Charities are required to provide you with information regarding their non-profit status with the IRS and tax ID numbers you can check yourself with the IRS website.
Perhaps the most common happenstance where it doesn't pay to donate a car is when the rest of your allowable deductions for a given year, when added to the car donation deduction, add up to less than the standard deduction allowed you. Of course, this differs depending upon how you file.
For instance, if you file as a head of household you'll have to come up with nearly $2,500 more than if you'd filed as single or married filing separately to reach that standard deduction amount. This can be difficult for those who are simply working for a living as opposed to those who are self-employed.
It is also useful to note that the higher your tax bracket, the less a deduction will actually take off your total tax burden. This is because deductions are taken from your net income, not the total tax as many suppose. As such, legitimate car donation deductions are typically worth about a third after figuring out taxes, less if you're in a higher tax bracket.
That said, in the case of a high value car donation, deductions can make the difference between paying in a higher or lower tax bracket. This can have important implications on your total tax burden that far outstrip the actual value of the car donation. Deductions may, on the other hand, have little or no effect on your final income bracket.
It's always best to check and see how close you are to the edge of a more favorable income bracket near the end of a given year. Since you're allowed to make donations up until the 31st of December, as long as you get a certificate of receipt, it doesn't even matter if the car is hauled away until the next year, as long as you have a piece of paper stating that the initial transaction occurred before the 31st.
However, the regulations that govern how car donation deductions can be valued have seriously impacted the once booming market of car donation. Deductions have fallen sharply as well, and it is estimated that the IRS is now saving more than half a billion dollars per year in reclaimed revenues. Aren't you glad you could help? You should be if your car donation deduction is actually a liability under the new rules.
I hope this is helpful information when considering car donations to charities.
Not all car donation deductions are created equal – there are even cases where donating an auto in good faith can actually increase your tax owed under certain circumstances. Like anything else involving the IRS, the burden of proof is upon you, so the more information and documentation you have to back up your car donation deduction, the better.
Thankfully, just as rules have tightened up for donors, the onus of documenting the ultimate use or destination of a donated car rests with the charity receiving your car donation. Deductions are now tied to the ultimate use of the vehicle. So, if the charity you choose or, the third-party (often for-profit organization) that acts as an intermediary between yourself and said charity, sells your car at a loss, you'd have a hard time claiming fair market value for such a donation.
The charity is required to give you a receipt stating the use of the vehicle within 30 days of donation, whether it's actually met its final fate yet or not. If it is used and later sold, you'll receive a new receipt outlining this use, too.
On the other hand, if the charity you choose has a mission that includes using the donated vehicle to further their mission or they sell it at a loss to a needy family, you may still claim the “fair market value.” This may, however, get your return some unwanted attention that you may not welcome for other reasons. If this doesn't sound like a good idea to you, it may be wise to consider something other than car donation for deduction purposes.
Indeed, it pays to be careful of who is receiving your donated auto. This is especially true in the case of car donations and deductions taken from charities that are not recognized as non-profit organizations by the IRS. This is easily checked, and doing so can save you a great deal of heartache later. Charities are required to provide you with information regarding their non-profit status with the IRS and tax ID numbers you can check yourself with the IRS website.
Perhaps the most common happenstance where it doesn't pay to donate a car is when the rest of your allowable deductions for a given year, when added to the car donation deduction, add up to less than the standard deduction allowed you. Of course, this differs depending upon how you file.
For instance, if you file as a head of household you'll have to come up with nearly $2,500 more than if you'd filed as single or married filing separately to reach that standard deduction amount. This can be difficult for those who are simply working for a living as opposed to those who are self-employed.
It is also useful to note that the higher your tax bracket, the less a deduction will actually take off your total tax burden. This is because deductions are taken from your net income, not the total tax as many suppose. As such, legitimate car donation deductions are typically worth about a third after figuring out taxes, less if you're in a higher tax bracket.
That said, in the case of a high value car donation, deductions can make the difference between paying in a higher or lower tax bracket. This can have important implications on your total tax burden that far outstrip the actual value of the car donation. Deductions may, on the other hand, have little or no effect on your final income bracket.
It's always best to check and see how close you are to the edge of a more favorable income bracket near the end of a given year. Since you're allowed to make donations up until the 31st of December, as long as you get a certificate of receipt, it doesn't even matter if the car is hauled away until the next year, as long as you have a piece of paper stating that the initial transaction occurred before the 31st.
However, the regulations that govern how car donation deductions can be valued have seriously impacted the once booming market of car donation. Deductions have fallen sharply as well, and it is estimated that the IRS is now saving more than half a billion dollars per year in reclaimed revenues. Aren't you glad you could help? You should be if your car donation deduction is actually a liability under the new rules.
I hope this is helpful information when considering car donations to charities.
Thursday, September 11, 2008
Nationwide Vehicle Donation
Choosing a Charitable Facilitation Service That Accepts Nationwide Vehicle Donation
Whether they're local or nationwide, vehicle donation services are required to tell you what charities they're an agent for as well as what they expect to do with your vehicle once you've described it to them in detail. Though it is most common for such services to sell your vehicle at a wholesale auction, you can at least find a good company that will take care of everything for you and represents a charity that you can feel good about.
For starters, many of the third-party agents who facilitate nationwide vehicle donation companies are found online. Indeed, they often do a very good job of advertising their services so that you can find them on billboards, radio ads and on lawn signs. However, online is a good place to start, especially if you're looking to support a particular charitable non-profit organization (NPO).
If you know what sort of charity you want to support, then it's just a matter of finding a service that provides the information you need and doesn't charge you for any of the services you require to mke the donation happen. Most larger charitable operations work with large facilitation networks that operate nationwide and the golden rule of Vehicle donation is that you shouldn't have to pay for anything. Dismiss a service that attempts to give you charges instead of a donation receipt.
Moreover, it is your right to know what they intend to do with the car. You are also able to ask for the tax ID number of the charity in question to make sure they're sanctioned by the IRS. If not, you'll not be allowed to take a deduction from your taxable income. Since they tend to represent large national charities, many nationwide vehicle donation companies keep a list of tax ID numbers on their websites so you can check on the legitimacy of their charities at your leisure.
Nationwide vehicle donation services also are responsible for getting you a receipt when your car is sold. This is especially important for those hoping to take a tax deduction from their charitable deduction. Without that receipt that you're supposed to receive from whomever sells your automobile within 30 days of the sale, you can't take a deduction for more than $500.
On the other hand, some types of donation have the possibility of finding someone in the community who can actually use your car, rather than selling it's pieces to mechanics nationwide. Vehicle donations used in this manner are not dependent upon a sales price, but instead the amount you'd be likely to sell the vehicle for yourself.
If your car isn't running, or is in otherwise terrible shape, it is likely you're more interested in just getting rid of the thing rather than securing a few hundred dollars in additional deduction money. In that case, your choice of a nationwide vehicle donation service is largely one of convenience.
In that case, you'd prehaps be most interested in arranging pickup during hours that are convenient for you. In fact, if the prospect of a tax donation and assisting a charity aren't that important to you, it may behoove you to check out nationwide vehicle donation and recycling services. In that case, the service will forego the pretense of charitable donation in favor of a reward in trade for giving your car to the company if you choose the recycling option.
Nationwide vehicle donation services are set up to be able to serve a wide variety of donors. As such, they are readily available to take cars away, for free, from just about anywhere in the country. Often they'll let you choose to make your donation to one of many charities or into a fund that goes to all of them equally.
One of the best things about choosing a nationwide vehicle donation is the ease of using them. Just give your name, location some information about the car, and someone is usually there within a day or two to take that vehicle, running or not, away for good.
Whether they're local or nationwide, vehicle donation services are required to tell you what charities they're an agent for as well as what they expect to do with your vehicle once you've described it to them in detail. Though it is most common for such services to sell your vehicle at a wholesale auction, you can at least find a good company that will take care of everything for you and represents a charity that you can feel good about.
For starters, many of the third-party agents who facilitate nationwide vehicle donation companies are found online. Indeed, they often do a very good job of advertising their services so that you can find them on billboards, radio ads and on lawn signs. However, online is a good place to start, especially if you're looking to support a particular charitable non-profit organization (NPO).
If you know what sort of charity you want to support, then it's just a matter of finding a service that provides the information you need and doesn't charge you for any of the services you require to mke the donation happen. Most larger charitable operations work with large facilitation networks that operate nationwide and the golden rule of Vehicle donation is that you shouldn't have to pay for anything. Dismiss a service that attempts to give you charges instead of a donation receipt.
Moreover, it is your right to know what they intend to do with the car. You are also able to ask for the tax ID number of the charity in question to make sure they're sanctioned by the IRS. If not, you'll not be allowed to take a deduction from your taxable income. Since they tend to represent large national charities, many nationwide vehicle donation companies keep a list of tax ID numbers on their websites so you can check on the legitimacy of their charities at your leisure.
Nationwide vehicle donation services also are responsible for getting you a receipt when your car is sold. This is especially important for those hoping to take a tax deduction from their charitable deduction. Without that receipt that you're supposed to receive from whomever sells your automobile within 30 days of the sale, you can't take a deduction for more than $500.
On the other hand, some types of donation have the possibility of finding someone in the community who can actually use your car, rather than selling it's pieces to mechanics nationwide. Vehicle donations used in this manner are not dependent upon a sales price, but instead the amount you'd be likely to sell the vehicle for yourself.
If your car isn't running, or is in otherwise terrible shape, it is likely you're more interested in just getting rid of the thing rather than securing a few hundred dollars in additional deduction money. In that case, your choice of a nationwide vehicle donation service is largely one of convenience.
In that case, you'd prehaps be most interested in arranging pickup during hours that are convenient for you. In fact, if the prospect of a tax donation and assisting a charity aren't that important to you, it may behoove you to check out nationwide vehicle donation and recycling services. In that case, the service will forego the pretense of charitable donation in favor of a reward in trade for giving your car to the company if you choose the recycling option.
Nationwide vehicle donation services are set up to be able to serve a wide variety of donors. As such, they are readily available to take cars away, for free, from just about anywhere in the country. Often they'll let you choose to make your donation to one of many charities or into a fund that goes to all of them equally.
One of the best things about choosing a nationwide vehicle donation is the ease of using them. Just give your name, location some information about the car, and someone is usually there within a day or two to take that vehicle, running or not, away for good.
Wednesday, September 3, 2008
In Lieu of Regular Car Donation, Non-profit Organizations Find New Sources of Revenue
In a 2003 report from the General Accounting Office, it was shown that most charities that employed such third party agents were likely to only receive 1-5% of a vehicle's actual worth from car donation. Non-profits with a charitable mission that doesn't include the actual use of a car had few options when accepting donated cars, especially those that needed mechanical repair, other than selling them on the scrap or wholesale markets.
Since the 2005 rulings that severely limited the amount of money that could be deducted for the most common types of car donation, non-profit organizations with an educational or a mission that includes the direct use of cars have had to come up with new sources of funding to make up for the loss of donor activity. In most cases, for the amount required to offset the loss of car donations, non-profit organizations with a charitable mission were relatively unaffected since the amount they were receiving from third-party donation agents was very small anyhow.
At that time, there were over 4,000 organizations accepting car donations. Non-profits with their own services accounted for less than 3% of the total in 2002. However, since the rule changes of 2005, the percentage of non-profits with their own shops has gone up markedly since so many of the for-profit companies have gotten out of the car donation business since is no longer nearly as lucrative for them.
Of course, this means that organizations that are in a position to accept cars directly are well-placed, as there are just as many cars that are good candidates for car donation. Non-profit organizations that accept vehicles for use, usually those that are still running and able to be delivered by the donor, have been able to reach a higher share of the donor market since there's less competition and a decade of billboards and radio ads by those for-profit companies has left an impact on people's minds.
As for the various fund-raising challenges that charities now face without car donation, non-profits nationwide have adopted an expanded list of items they are willing to accept. Cash is always good ad is the donation of choice, usually in the form of a nice, fat check.
Next, there is the inevitable acceptance of non-cash gifts that are still related to money markets or other business forces, such as stocks and bonds. These are very easily turned into cash for operations. Car donation to non-profit organizations is, even in the best of circumstances, takes longer to turn into cash money.
Even coin collections, stamps and other small, non-mobile hard goods of great value are accepted in many cases, in lieu of car donation. Non-profit organizations are now set up to handle just about anything that can be easily shipped, partly due to the ease of putting items up for auction on eBay and other auction sites.
The same rules that apply toward car donation to non profits apply toward the donation of furniture and household goods. In fact, one is now barred from taking any sort of deduction from donating items that are not in "good" or better shape. That means no more sweaters with holes and no more mangled tennis rackets.
For instance, designer clothing that cannot be sold at a charitable retail store like those run by the Salvation Army, St. Vincent De Paul or the Goodwill Industries, is then sold as scrap material, and very probably sent to China, only to return as part of a cheap rug at WalMart. The IRS isn't interested in funding a trade imbalance, either. Thus, one can now only take the real value of clothing donated, just as with car donations.
Non-profits that are ready to make the best use of the car donations that come to them won't have to use additional sources of funding unless expanding their mission or trying to offer their paid employees a higher wage.
Since the 2005 rulings that severely limited the amount of money that could be deducted for the most common types of car donation, non-profit organizations with an educational or a mission that includes the direct use of cars have had to come up with new sources of funding to make up for the loss of donor activity. In most cases, for the amount required to offset the loss of car donations, non-profit organizations with a charitable mission were relatively unaffected since the amount they were receiving from third-party donation agents was very small anyhow.
At that time, there were over 4,000 organizations accepting car donations. Non-profits with their own services accounted for less than 3% of the total in 2002. However, since the rule changes of 2005, the percentage of non-profits with their own shops has gone up markedly since so many of the for-profit companies have gotten out of the car donation business since is no longer nearly as lucrative for them.
Of course, this means that organizations that are in a position to accept cars directly are well-placed, as there are just as many cars that are good candidates for car donation. Non-profit organizations that accept vehicles for use, usually those that are still running and able to be delivered by the donor, have been able to reach a higher share of the donor market since there's less competition and a decade of billboards and radio ads by those for-profit companies has left an impact on people's minds.
As for the various fund-raising challenges that charities now face without car donation, non-profits nationwide have adopted an expanded list of items they are willing to accept. Cash is always good ad is the donation of choice, usually in the form of a nice, fat check.
Next, there is the inevitable acceptance of non-cash gifts that are still related to money markets or other business forces, such as stocks and bonds. These are very easily turned into cash for operations. Car donation to non-profit organizations is, even in the best of circumstances, takes longer to turn into cash money.
Even coin collections, stamps and other small, non-mobile hard goods of great value are accepted in many cases, in lieu of car donation. Non-profit organizations are now set up to handle just about anything that can be easily shipped, partly due to the ease of putting items up for auction on eBay and other auction sites.
The same rules that apply toward car donation to non profits apply toward the donation of furniture and household goods. In fact, one is now barred from taking any sort of deduction from donating items that are not in "good" or better shape. That means no more sweaters with holes and no more mangled tennis rackets.
For instance, designer clothing that cannot be sold at a charitable retail store like those run by the Salvation Army, St. Vincent De Paul or the Goodwill Industries, is then sold as scrap material, and very probably sent to China, only to return as part of a cheap rug at WalMart. The IRS isn't interested in funding a trade imbalance, either. Thus, one can now only take the real value of clothing donated, just as with car donations.
Non-profits that are ready to make the best use of the car donations that come to them won't have to use additional sources of funding unless expanding their mission or trying to offer their paid employees a higher wage.
Why Vehicle Donations Are So Popular in The United States
Vehicle donations remain popular in the United States because there is still a potential for a significant tax deduction. However, since 2005 this deduction has been that much more difficult for people making relatively less valuable donations to claim the true fair market value for their cars. If one is well-off enough to donate a car that's worth at least $5,000 by an independent appraiser, the way is cleared for this higher rate of deduction.
Choosing a charity that handles vehicle donations independently of for-profit middle-men will allow even smaller donations to retain their full value in deduction form. Were there no IRS tax deductions, it isn't likely that people would be nearly as interested in charitable donations of cars.
According to a General Accounting Office report to the Senate Committee on Finance made in late 2003, the actual number of individuals or small businesses that donated automobiles was less than 800,000. That means that fewer than half of one percent of the nearly 200 million Americans who file with the IRS each year had vehicle donations to claim in a given year when the phenomenon was at its height.
Back up for a little history -- in the 1990s and early 2000s, it seemed you couldn't turn anywhere without seeing an ad or hearing a radio commercial begging people for vehicle donations. These ads resulted in a massive increase in the number of cars donated per year, but the overall number still wasn't very high.
This doesn't count the many who had the right to claim such a deduction for vehicle donations and didn't bother itemizing their returns. It was estimated that the actual number of donations might be as high as 1 million, or a little over half a percent.
Since 2005, the numbers of vehicle donations have declined with the amount of advertising, but also because the relative benefit to donors has been decreased when the IRS tightened up a loophole that essentially had the federal government subsidizing the used car parts market in the guise of charitable donation.
Today, vehicle donations account for a far lower percentage of tax returns than they did in 2004, though numbers now remain constant, with far fewer discrepancies between the amounts donated to charities and the amount actually claimed.
That said, there certainly are still opportunities with vehicle donations to claim the full value of your car on the open market – or what the IRS calls the, "fair market value," of your car. This requires you to find a charitable non-profit organization (NPO) that can use your car directly as part of its charitable mission. This may involve giving it away to a needy family or using it to deliver hot meals.
Of course, given the amount of money spent on advertising, most people don't realize the donation option that will take their car (often not running) away has become such a difficult prospect. Essentially, most taxpayers who go the option of using a third party agent for their vehicle donations, are limited to a $250 deduction without documentation, and up to $500 without the charitable NPO having to file a Form 8283.
Such a form is sent out after vehicle donations to acknowledge the date, type, actual value to the charity and ultimate use of your gift. This is in addition to the receipt you should get as soon as the title is transferred and the car hauled away.
If you're able to drive the car or truck to their offices, many charities that have an actual use for your car will accept donations. Otherwise, most third-party agents that facilitate vehicle donations don't want to assume the liability, preferring instead to tow all vehicles away indiscriminately.
It is uncertain how this is affecting the quality of donated cars, though the quantity certainly has gone down. It is possible that the quality of cars that reach actual poor people who need cars to get to work and day care has actually gone down since there are fewer donated vehicles to choose from, or it may simply be that the quality of donated vehicles has gone up, with those junkers previously sold now going to recycling programs and bypassing the donation angle completely.
Choosing a charity that handles vehicle donations independently of for-profit middle-men will allow even smaller donations to retain their full value in deduction form. Were there no IRS tax deductions, it isn't likely that people would be nearly as interested in charitable donations of cars.
According to a General Accounting Office report to the Senate Committee on Finance made in late 2003, the actual number of individuals or small businesses that donated automobiles was less than 800,000. That means that fewer than half of one percent of the nearly 200 million Americans who file with the IRS each year had vehicle donations to claim in a given year when the phenomenon was at its height.
Back up for a little history -- in the 1990s and early 2000s, it seemed you couldn't turn anywhere without seeing an ad or hearing a radio commercial begging people for vehicle donations. These ads resulted in a massive increase in the number of cars donated per year, but the overall number still wasn't very high.
This doesn't count the many who had the right to claim such a deduction for vehicle donations and didn't bother itemizing their returns. It was estimated that the actual number of donations might be as high as 1 million, or a little over half a percent.
Since 2005, the numbers of vehicle donations have declined with the amount of advertising, but also because the relative benefit to donors has been decreased when the IRS tightened up a loophole that essentially had the federal government subsidizing the used car parts market in the guise of charitable donation.
Today, vehicle donations account for a far lower percentage of tax returns than they did in 2004, though numbers now remain constant, with far fewer discrepancies between the amounts donated to charities and the amount actually claimed.
That said, there certainly are still opportunities with vehicle donations to claim the full value of your car on the open market – or what the IRS calls the, "fair market value," of your car. This requires you to find a charitable non-profit organization (NPO) that can use your car directly as part of its charitable mission. This may involve giving it away to a needy family or using it to deliver hot meals.
Of course, given the amount of money spent on advertising, most people don't realize the donation option that will take their car (often not running) away has become such a difficult prospect. Essentially, most taxpayers who go the option of using a third party agent for their vehicle donations, are limited to a $250 deduction without documentation, and up to $500 without the charitable NPO having to file a Form 8283.
Such a form is sent out after vehicle donations to acknowledge the date, type, actual value to the charity and ultimate use of your gift. This is in addition to the receipt you should get as soon as the title is transferred and the car hauled away.
If you're able to drive the car or truck to their offices, many charities that have an actual use for your car will accept donations. Otherwise, most third-party agents that facilitate vehicle donations don't want to assume the liability, preferring instead to tow all vehicles away indiscriminately.
It is uncertain how this is affecting the quality of donated cars, though the quantity certainly has gone down. It is possible that the quality of cars that reach actual poor people who need cars to get to work and day care has actually gone down since there are fewer donated vehicles to choose from, or it may simply be that the quality of donated vehicles has gone up, with those junkers previously sold now going to recycling programs and bypassing the donation angle completely.
Tuesday, September 2, 2008
Some Organizations That Benefit From Your Charitable Vehicle Donation
Consider the very large field that benefited in varying degrees from the glory days of charitable vehicle donation, before government regulation stepped in and made it harder for people to take unreasonable deductions that varied greatly from the actual amount that charitable organizations received. Though a large part of this had to do with some vaugery in how the law was written, it was also a consequence of a large segment of often less-than-scrupulous third-party agents who acted, supposedly, on behalf of the charities in question.
But when the US General Accounting Office (GAO) issued its landmark report on charitable vehicle donation to the Senate Committee on Finance in November of 2003, over 4,000 distinct charity and non-profit organizations (NPOs) were accepting vehicular donations. Though most of these used third-party, for-profit facilitating agents at the time, changes in tax laws for the 2005 tax season ushered in a new self-sufficiency among a smaller class of NPOs, often more closely geared toward benefiting from charitable vehicle donations.
Now that one can only deduct the amount their charitable vehicle donation actually nets the IRS-approved charity, many of these third party players have left the game seeking easier marks elsewhere. This means that many charities that relied on charitable vehicle donation for more than a small percentage of their annual budget were forced to either handle their own donations or make much stricter agreements with the companies that retrieved the vehicles for them.
As such, many of the charities that once accepted charitable vehicle donations were interested only in the money they were able to get from sales. These include many of the more commonly known and nationally represented charities such as Easter Seals, and the Lung Association. Indeed, medical related funds are very common types of charities that accept monies from donated cars rather than the cars themselves.
Some NPOs that accept charitable vehicle donation do so in an effort to further aspects of their social mission that include donating repaired vehicles to needy residents or using them to create a fleet of vehicles to shuttle old folks to their doctor appointments. Sometimes the receipt of a charitable vehicle donation is tied to taking classes learning how to fix and maintain such a car, should anything go wrong (which it undoubtedly go haywire in the span of a few years given the used nature of your donation).
Like Habitat for Humanity, some charitable vehicle donation projects make part of the charitable process dependent upon the recipients and other members of the community working together to actually make the donation something useful. Such charities with an educational and uplift mission don't have to be schools, though other types of education are usually involved. In this case, your charitable vehicle donation has the best chance of actually becoming a running and useful gift.
Another type of charity that can use your charitable vehicle donation doesn't have the facilities to fix vehicles, but may have a need for a donated vehicle. For instance, some schools have use for a vehicle temporarily, such as when the sports teams are travelling, but as soon as they're back for the year, the car may be sold to the highest bidder. This can include colleges and adult education, too.
One surprisingly eager recipient of charitable vehicle donation are the local police and fire department. This is one area where a boat may actually be likely to be used for professional purposes, such as in the case of search and rescue missions. Most police and fire departments are always on the lookout for a car that runs well enough to be used right away.
The ideal charity is one that can use your charitable vehicle donation directly rather than selling it as quickly as possible at auction. In the case of educational missions, a car with few dents and mechanical problems can prove invaluable to those in need, even if your charitable vehicle donation is in pretty rough shape when received. And the area of vehicle or car donations is continually changing.
But when the US General Accounting Office (GAO) issued its landmark report on charitable vehicle donation to the Senate Committee on Finance in November of 2003, over 4,000 distinct charity and non-profit organizations (NPOs) were accepting vehicular donations. Though most of these used third-party, for-profit facilitating agents at the time, changes in tax laws for the 2005 tax season ushered in a new self-sufficiency among a smaller class of NPOs, often more closely geared toward benefiting from charitable vehicle donations.
Now that one can only deduct the amount their charitable vehicle donation actually nets the IRS-approved charity, many of these third party players have left the game seeking easier marks elsewhere. This means that many charities that relied on charitable vehicle donation for more than a small percentage of their annual budget were forced to either handle their own donations or make much stricter agreements with the companies that retrieved the vehicles for them.
As such, many of the charities that once accepted charitable vehicle donations were interested only in the money they were able to get from sales. These include many of the more commonly known and nationally represented charities such as Easter Seals, and the Lung Association. Indeed, medical related funds are very common types of charities that accept monies from donated cars rather than the cars themselves.
Some NPOs that accept charitable vehicle donation do so in an effort to further aspects of their social mission that include donating repaired vehicles to needy residents or using them to create a fleet of vehicles to shuttle old folks to their doctor appointments. Sometimes the receipt of a charitable vehicle donation is tied to taking classes learning how to fix and maintain such a car, should anything go wrong (which it undoubtedly go haywire in the span of a few years given the used nature of your donation).
Like Habitat for Humanity, some charitable vehicle donation projects make part of the charitable process dependent upon the recipients and other members of the community working together to actually make the donation something useful. Such charities with an educational and uplift mission don't have to be schools, though other types of education are usually involved. In this case, your charitable vehicle donation has the best chance of actually becoming a running and useful gift.
Another type of charity that can use your charitable vehicle donation doesn't have the facilities to fix vehicles, but may have a need for a donated vehicle. For instance, some schools have use for a vehicle temporarily, such as when the sports teams are travelling, but as soon as they're back for the year, the car may be sold to the highest bidder. This can include colleges and adult education, too.
One surprisingly eager recipient of charitable vehicle donation are the local police and fire department. This is one area where a boat may actually be likely to be used for professional purposes, such as in the case of search and rescue missions. Most police and fire departments are always on the lookout for a car that runs well enough to be used right away.
The ideal charity is one that can use your charitable vehicle donation directly rather than selling it as quickly as possible at auction. In the case of educational missions, a car with few dents and mechanical problems can prove invaluable to those in need, even if your charitable vehicle donation is in pretty rough shape when received. And the area of vehicle or car donations is continually changing.
Monday, September 1, 2008
Determining the Value of Your Charitable Car Donation
How do you determine the value of a donated car? It could be said that the new regulations regarding car donation, going into effect during the 2005 tax season, actually make it easier to avoid audit, since there is far less wiggle room to maneuver within. However, to actually take a legal deduction from your taxes, there will need to be some forms filed and receipts gathered.
Begun several decades ago by the Goodwill Corporation to train their employees and recycle unwanted vehicles, car donation programs were designed to be offered by NPOs alone to serve a direct and needy market. In the 1990s, a tremendous upsurge in for-profit organizations that spent a great deal of money on advertisements created a rapidly expanding trend of even lower-middle class individuals using car donation to reap the charitable tax deductions offered by the receiving agents.
The extent to which you are required to prove the worth of your charitable donation, given to a IRS approved 501 (c)(3) non-profit organization (NPO), is determined by the likely value of the gift. That said, one doesn't always know what the sale of their car will fetch in the marketplace, regardless of what some chart may tell you. The actual price your car donation fetches will be your deductible value, and this can actually be rather low when sold on the wholesale market, especially by a third-party agency that facilitates car donation for NPOs that lack the facilities or manpower to handle such donations themselves.
When assessing your car donation, one must really consider what it is worth on the market, both if you sell it yourself and if you use another agency to sell it on the wholesale market for you. One can assume anywhere from 20-60% of the value of the retail market in such sales. Since a great many NPOs still use third-party (over 95% being for-profit organizations according to a scathing 2002 investigative article) intermediaries to manage the pickups, title-transfers and sales, you should give some hard consideration to how you want to handle your own car donation.
Many people choose to fix up and sell their own vehicles, preferring to pay tax on that “income” and give the remainder to the charity of their choice. Everyone, after all, takes cash. This way you also act as your own “middle man,” giving your time as well as the donated value of your car. You could even sell that car for scrap, have it hauled away, and give the proceeds to the charity, cutting out that sometimes very expensive middle step of involving a car donation facilitator.
Regardless of how you go about it, a non-cash gift to a charity is likely to fetch less than $250, you don't need any sort of receipt from the NPO – the IRS will, in this case, take you at your word. All you need to supply is the name of the charitable organization that received your car donation, the date of the car donation, the place the donation took place,
However, if the value of your car donation is $250 or greater, you'll need to get a receipt from the charity that is officially registered as an NPO or charity by the IRS. If you want to check up on a given charity's status, they should be able to provide you with a non-profit tax ID number that you can then check against the IRS database. This receipt should be dated and indicate what use the vehicle was to be put to, even if it is just for sale.
Car donations destined for immediate sale are typically not valued for tax purposes until the sale has been made. Instead, one will receive a temporary receipt that indicates a transfer of title and a forthcoming receipt to be used for determining your deduction.
This is most often true of vehicles worth over $500. Such vehicles must be accompanied by Form 8283 (section A only) that the authorized charity issues along with their own receipt of car donation monies. In a perfect world, those separate car donation and charitable income figures will match up with each other as well as the amounts people are deducting from their personal or family income taxes, as they assuredly didn't before 2005.
Sale values over $5,000 must also be accompanied by an appraisal from an independent agent that can verify the fair market value of any car donation. Now that one must present proof of how much their car donation earned at auction, there is little reason to make any kind of error when valuing your car donation for deductible purposes. So go ahead, help a good cause with your car donation!
Begun several decades ago by the Goodwill Corporation to train their employees and recycle unwanted vehicles, car donation programs were designed to be offered by NPOs alone to serve a direct and needy market. In the 1990s, a tremendous upsurge in for-profit organizations that spent a great deal of money on advertisements created a rapidly expanding trend of even lower-middle class individuals using car donation to reap the charitable tax deductions offered by the receiving agents.
The extent to which you are required to prove the worth of your charitable donation, given to a IRS approved 501 (c)(3) non-profit organization (NPO), is determined by the likely value of the gift. That said, one doesn't always know what the sale of their car will fetch in the marketplace, regardless of what some chart may tell you. The actual price your car donation fetches will be your deductible value, and this can actually be rather low when sold on the wholesale market, especially by a third-party agency that facilitates car donation for NPOs that lack the facilities or manpower to handle such donations themselves.
When assessing your car donation, one must really consider what it is worth on the market, both if you sell it yourself and if you use another agency to sell it on the wholesale market for you. One can assume anywhere from 20-60% of the value of the retail market in such sales. Since a great many NPOs still use third-party (over 95% being for-profit organizations according to a scathing 2002 investigative article) intermediaries to manage the pickups, title-transfers and sales, you should give some hard consideration to how you want to handle your own car donation.
Many people choose to fix up and sell their own vehicles, preferring to pay tax on that “income” and give the remainder to the charity of their choice. Everyone, after all, takes cash. This way you also act as your own “middle man,” giving your time as well as the donated value of your car. You could even sell that car for scrap, have it hauled away, and give the proceeds to the charity, cutting out that sometimes very expensive middle step of involving a car donation facilitator.
Regardless of how you go about it, a non-cash gift to a charity is likely to fetch less than $250, you don't need any sort of receipt from the NPO – the IRS will, in this case, take you at your word. All you need to supply is the name of the charitable organization that received your car donation, the date of the car donation, the place the donation took place,
However, if the value of your car donation is $250 or greater, you'll need to get a receipt from the charity that is officially registered as an NPO or charity by the IRS. If you want to check up on a given charity's status, they should be able to provide you with a non-profit tax ID number that you can then check against the IRS database. This receipt should be dated and indicate what use the vehicle was to be put to, even if it is just for sale.
Car donations destined for immediate sale are typically not valued for tax purposes until the sale has been made. Instead, one will receive a temporary receipt that indicates a transfer of title and a forthcoming receipt to be used for determining your deduction.
This is most often true of vehicles worth over $500. Such vehicles must be accompanied by Form 8283 (section A only) that the authorized charity issues along with their own receipt of car donation monies. In a perfect world, those separate car donation and charitable income figures will match up with each other as well as the amounts people are deducting from their personal or family income taxes, as they assuredly didn't before 2005.
Sale values over $5,000 must also be accompanied by an appraisal from an independent agent that can verify the fair market value of any car donation. Now that one must present proof of how much their car donation earned at auction, there is little reason to make any kind of error when valuing your car donation for deductible purposes. So go ahead, help a good cause with your car donation!
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