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Special Regulations Concerning Charity Car Donation and Businesses Reducing Fleet Overhead
from:Individuals aren't the only ones who can reap the potentially manifold benefits of taking a valuable tax cut after participating in a charity car donation program. Businesses that operate a legitimate fleet operation can get rid of unwanted, older and high mileage vehicles and be in a good postion to reap the highest possible “fair value” deduction that is allowed under current charity car donation rules. Of course, since this is a business return we're talking about, there are special rules that accompany such a charitable contribution.
For starters, a business that runs (and presumably maintains a fleet) is in a position to donate time and labour to a vehicle donation program – not just used vehicles. Valuing such service on your tax returns is tricky at best and is best handled by a CPA. You should keep strict records of all interactions with the charity. Car donation can be part of a total charitable package that can help greatly with end of year tax evaluation, especially if the business is teetering on the edge of a higher tax bracket.
Also, the so-called “50% rule” that applies to private individuals, limiting their allowable deductions to less than 50% of their taxable income, differs for businesses. Generally, 30% is a reasonable self-imposed limit that will keep the auditors at bay.
How deductions are taken from your return also varies quite a bit by the the type of business you're registered as and whether you file quarterly or annually. Again, talking to your accountant about the possibility of taking a donation rather than selling fleet vehicles on the open market is usually a stop-gap solution to a higher than usual tax burden as calculated for quarterly returns.
Of course, the flip side of this coin is when individual charity car donations are destined to become part of a institutional fleet, such as those employed by colleges and universities. These legal fleets are very likely to be maintained properly by trained mechanics, making it very likely that the individual donor will be able to take the “fair market value” deduction for a vehicle that is seeing fair market use rather than low-end resale for cash.
Other than the potentially high value of fleet cars that are donated and the extra concern of getting an independent appraisal for vehicles that will garner over $5,000 in legitimate deductions, the process is very much the same as private party charity car donations. Indeed, just like private parties, one is required to use the actual value of the vehicle to the charity in question.
Since fleet vechiles tend to be in good repair, they are very likely to be used as is rather than sold at auction. Charities know a good thing and a relatively late model vehicle in good working order to be received as a charity car donation is a rare thing.
As the owner of fleet vehicles ready for charity car donation, you can generally be assured that if you choose a non-profit, charitable organization with a mission to provide vehicular transportation to receive your donation, the odds are pretty good you'll be able to claim a full “Private Party Values” from the Kelly Blue Book, depending upon the specific condition of your vehicles.
To make such a deduction claim from your legitimate charity car donations, be sure to take good pictures of the donated cars, just in case it ever comes to an audit. If you're prepared, you have a good chance of fighting such intrusions off without problem as long as you have the correct documentation.
Be sure to save every single receipt you receive from a charity car donation organization, no matter who is running it. Often you'll get one receipt from the actual transfer of title, and then in the next month or so, either a bill of sale or a record indicating what ultimate use your charity car donation was put to. Again, it's always best to keep your business accountant fully versed as to what you plan to do with fleet automobiles, but donation may actually take a bit of hassle out of what can be a tedious prospect of dealing with many potential buyers.
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