Tax Tips
Auto Donations to Charities - October 2004
Richard Scrivanich - Partner
Be Tax-Smart When Donating a Car to Charity
An increasing number of charities have turned to car donation programs in recent years as an effective way to raise money. The programs are popular: of 129 million individual returns filed for tax year 2000, the General Accounting Office estimates 733,000 returns had a tax deduction for a vehicle donation.
Before you decide to contribute your old vehicle to a charity, you need to consider certain issues, ranging from the qualification status of the charity to the amount that can be deducted. You will also want to be sure that the charity will receive a significant benefit from your contribution, since in many instances such vehicle contributions may help the intended charities far less than taxpayers think. For instance, a California study revealed that 80 percent of charities contracting with fundraisers to run their car donation program received less than 60 cents for every dollar value of vehicle donated.
If you are thinking of donating your vehicle to charity, here are some of the steps you should take:
Check that the organization is qualified:
You must make certain you contribute your car to an eligible organization, otherwise your donation will not be tax deductible. You can use the IRS Web site to check that an organization is qualified by searching Publication 78 at http://www.irs.gov/charities/article/0,,id=96136,00.html. Publication 78 is an annual, cumulative list of most organizations that are qualified to receive deductible contributions. Publication 78 is also available in many public libraries.
Churches, synagogues, temples, schools, mosques, and governments are not required to apply for this exemption in order to be qualified. They frequently are not listed in Publication 78; however, donations to these institutions are tax deductible.
Speak directly to the charity:
You may want to make sure your contribution is used for the charitable purpose you intend. You should ask whether those soliciting the car donation are officials of the charity itself or a private fundraiser acting on the charity’s behalf. If it is a private fundraiser, what will it do with the vehicle? Will the car be fixed up and given to the poor and needy? Or will it be resold? And if it is resold, what share of the proceeds will go to the charity?
Itemize in order to benefit:
Remember that you can’t take a deduction for a car donation unless you itemize your deductions on your personal tax return.
Deduct only the car’s fair market value:
You can generally deduct an amount equal to the car’s fair market value. However, some car donation program operators have mistakenly claimed that donors can take the full “Blue Book” value of their car for a deduction. The fair market value of the taxpayer’s car may be substantially different from the “Blue Book” value. Fair market value takes into account many factors, including the vehicle’s condition.
Document the contribution:
You will need to document the car donation and its fair market value. Record keeping requirements are comprehensive and vary depending on the amount of the contribution and the total amount of the charitable deduction.
If you have any questions regarding donating a car to charity or any other tax matters, please give me a call at (562) 698-9891.
Return to Tax Tips Archives
All rights reserved. For personal use only.
Do not duplicate or distribute without permission. All information in this
article is for informational purposes only.
Some of the articles included here were written in a prior
year or before a current tax law change. Therefore some of the information in
the older articles may not still be valid. Any dollar thresholds indicated
relate only to the year for which the article was written and could be different
for the current year. Please discuss with us your personal situation before
acting on any of the information provided. If you have any questions,
please give us a call at (562) 698-9891.
|
