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Claiming More Than Wholesale Auction Value When Donating a Car to Charity
from:It is unfortunate that while so many charities accept non-cash gifts such as donating cars, stocks or durable goods, very few of them handle this task themselves. This practice, involving a partnership of for-profit companies who manage the towing and paperwork with the charity itself, often result in a perfectly good car (though it may need some minor work) being sold at a wholesale auction.
Very often these cars are sent out for parts or sold elsewhere for yet another profit that goes to for-profit car lots (often those that prey upon low-income folks with few options) rather than the charities that actually serve people who need transportation. Perhaps worst of all, donating your car to such an company results in a far lower allowable tax deduction when donating a car for tax break purposes.
Of course, one of the most compelling why many people consider donating cars past their prime is the hefty tax deduction benefit that many car donation services advertise. However, since 2005, the rules that govern how you may take your deduction have changed. Now, you are only able to deduct (from your Form 1040, Schedule A, Itemized Deduction worksheet) the amount that was actually delivered to the charity of your choice.
As such, when donating a car, you want to make sure you and the non-profit organization (NPO) both get the most for your car as possible. Generally, no matter how you go about donating, cars are either sold as is, refurbished and sold, or refurbished and given away. While the first option is most often subject to the very tight fist of the wholesale automotive market, the other two options usually allow you to take a much higher deduction that is more likely to be in line with the actual “fair market value” of your car.
The organization that takes your car is required by law to let you know what happened to it, within 30 days of a title transferring transaction or donation. A car donation must then result in your getting a receipt for the original transfer to the towing service, then a second receipt telling you what happened with your old car. Your wishes have nothing to do with it after the moment you sign the title over.
Even though you're doing the donating, cars that are not deemed nice enough to get a nice, fat return on the retail market (and that would be most of them given up for donation) are sold as quickly as possible. So, if you call the auto donation service with the largest ad in the yellow pages, you have a good chance of having your car sold quickly, at a wholesale auction and netting as little as 5% of the amount you might make if you tried to make a private sale of the car yourself.
Your best bet for a good-sized deduction when donating your car is to find someone who can actually use the vehicle or fix it up. From a charitable standpoint, perhaps the best option is utilizing a charity to help match you with someone in your community that needs a car to get to work or to take the kids to daycare. There are many reasons why people need vehicles and quite a few places (and even municipalities and governments) that will facilitate this sort of charitable exchange between people.
There are also instances where donating a car is a chance to teach people in the community how to fix cars. This is especially true of vehicles that aren't too badly damaged, but are in otherwise good enough shape to warrant a single major repair, especially if it's more labor intensive than reliant upon expensive parts.
You need to do some very careful evaluation to see if donating a car for educational use is a good option. If so, your local high school, college or even police department are all perfectly legal and potentially useful places to go about donating a car you no longer need or want.
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