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Using a Vehicle Donation Program Versus Selling Your Own Car and Donating the Proceeds
from:Perhaps the best and most common reason for choosing to use a vehicle donation program is the ease of it. You just sign a form online, on the phone or by mail and someone arrives at your house ready to haul your car, truck, motorcycle, RV or trailer away. This is generally true, no matter where you live, and frees you from having to spend time or money on the dump or municipal recycling program.
Of course, the truly enterprising could strip their own non-functional car and sell the parts. But the odds are, if you have the ability and resources to pull a car apart, it'd probably still be working. So, for those few brave souls who want to sell their car, once piece at a time on eBay, there is a potential profit. However, this hardly ever happens and most people simply let a loosely affiliated string of professionals that make up a vehicle donation program take care of each step of the process in an assembly-line manner.
Most vehicle donation programs are run by for-profit companies who work on behalf of a given charity or, in some cases, many charities that you may choose from when donating. They are third-party agents who do all the advertising, pickup, and initial sale of the vehicle at a wholesale auction.
From there, your car is torn apart to have the usable pieces removed for sale as used component parts. The rest is sold to scrap dealers who will then remove the pieces for recycling or simply crush it. The most important part to most donors who choose to use a vehicle donation program to get rid of their car is the rather small sale amount that can result.
A car worth a thousand dollars, for instance, will typically sell for anything from 5-30% of its “fair market value” at a wholesale auction. The higher the real retail value of the car, the higher percentage one is likely to receive.
So, assume the vehicle donation program gets $100 for your car or truck. As much as $70 may have been spent in administrative costs – an average cut for such a company as found by the General Accounting Office (GAO) during an investigation of car donation business practices in late 2003.
That means that only $30 of the donation from your vehicle is going directly to the charity from your gift of $1,000. Furthermore, you're limited to what you can deduct by what the charity actually receives, so you are now entitled to a $30 tax deduction – not enough money to justify itemized deductions in many cases.
Unless you can find a charity that doesn't use outside agents to run their vehicle donation program and, has an actual use for your car or truck, you'll be stuck with a wholesale auction price.
Of course, the better condition your car is in, the more likely any given vehicle donation program will take the extra time to sell it on the open market. If this is the case, you'll receive a From 8283 as a sort of receipt for how much the car was sold for and you may claim this “retail” value as your deduction.
Knowing where to find an agency that has an actual use for your vehicle, rather than using the far simpler vehicle donation program services of professionals, can take a bit of surfing and calling around. Generally, you'll be dealing with agencies that don't spend large portions of their budgets on advertisements.
You may be surprised at the unusual non-profit organizations that may take advantage of your gift. A gift to any charitable organization with tax-exempt status (not politics!) will net you a tax deduction. This could be a church, high school, municipal government, college or social organization that has a need for a car to complete its mission or has an educational mission that includes automotive repair.
Such donations allow you to claim the “fair market value” of your car, or the amount you'd receive if you were to take a classified ad about and conduct the sale yourself. So, your choice is between relative ease and your potential tax deduction.
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