Dec 15 2011
Can your Car Donation Really Save you Money???
So here you are at the end of the year and you’re doing everything you can to defer your income and accelerate your expenses. You want to leave no stone unturned when it comes to potential tax deductions. That’s why its 10pm on a Friday night just 1 day before the end of the year and you’re in your garage wondering if donating your old car would be a good idea.
You’ve seen the ads on TV, you’ve heard the radio jingles, and you’ve even seen the billboards close to your office; “Donate your Cars to Charity; Get a Tax Deduction this Year!” But, is it really worth it? Can you really save money on your taxes by donating your car? And who do you donate it to? How do you choose, there are so many ads? If buying your car was such a horrible experience, how can you trust someone to take it from you for free?
Well, these are all good questions and, unfortunately, I don’t have any answers for you. This is one you’ll have to figure out on your own. But I can offer a few suggestions to help you with your decision.
A. A Car Donation to a qualified charity is deductible under the IRS Code and could result in significant tax savings for you depending on the value of the car donation and your own tax situation. Please refer to the IRS website regarding car donations and always consult your tax professional. I’m sure he will appreciate your call at 10pm the night before New Year’s Eve.
B. The car donation business is a sorted group of players, very few of which you would want to invite into your home for dinner and fewer still that you would want to invite to your little private garage party the day before New Years Eve. Don’t get me wrong, we’re all good people, but when we are competing with hundreds of others all standing on the corner with a cup in our hand waiting for some generous soul like you to place a vehicle in that cup so that we don’t starve this winter you get a lot of weird behavior that makes us all seem like a bunch of undesirables. “Hey, over here” yeah you! Thinking about donating your car? How about a free vacation? Would you like that? No? How about a gas card? You need one of those? I’ll pick up your car for free? I’ll do all the paperwork? Take a look at these pictures of my starving family, my littlest is so hungry, please help!”
Yeah, it’s weird out there, and that makes it difficult for you to trust any of us. But still, you could realize a substantial tax savings from donating your car and if you can use the deduction, it’s something you should consider. So here’s what you need to do.
1. Donate directly to a charity. There are few charities out there that operate vehicle donation programs, and there are a lot more who engage the services of a commercial fundraiser who operates the vehicle donation program on their behalf. Seek out the charities that operate their own programs and you have a greater chance that the proceeds from the sale of your donated vehicle actually go to fund a charitable cause and not line the pockets of a private enterprise with a parasitic relationship to the non-profit world.
2. Make sure the charity you choose has the ability to recondition your car and sell it retail. A retail sale of your donated vehicle can bring the highest price for your donation and that translates into the highest tax deduction value for you. Of course, not every donated vehicle can be or should be reconditioned. Sometimes it doesn’t make sense financially and the charity is better off wholesaling your vehicle to get the highest return. But, if the charity you choose doesn’t have this ability, you could be leaving a lot of tax savings on the table by giving your car to them. Let’s look at an example:
Here’s a vehicle that was donated to Cars 4 Causes this year. It is a 2001 BMW 540i with 97,000 miles. When we received this vehicle at one of our sales lots, it was found to be in good mechanical conditions, with excellent interior. The body was intact, but the vehicle had been stored outdoors and the paint and finish had severe scorching and weather damage. Repairs needed were new brake pads, grill trim replacement, passenger rear view window cover replacement and a paint job. Had we sent this vehicle to one of our wholesale lots we would have received $1,500 to $1,800 maximum for the vehicle in its donated condition.
Cars 4 Causes has the expertise and staff to perform minor repairs to its donated vehicles such as those that were needed on this BMW. So, we reconditioned this vehicle and sold it through our on-line retail sales outlet. The sales price received for this vehicle – $6,100. That’s a huge difference and one that you should certainly pay attention to if you’re interested in getting the maximum tax write off for your vehicle donation.
3. Look for Experience and Longevity. Make sure the organization you donate to has the experience to handle your donation properly, has been around for a long time and isn’t just some fly-by-night organization that just opened its doors and posted a website to prey on year-end donors like you. Cars 4 Causes is America’s 1st vehicle donation charity. We opened our doors in 1997. We’ve handled more than 160,000 donations and raised over $100 million, sharing these proceeds with more than 16,000 charities, schools and religious organizations through the U.S.
4. Demand Visibility. As you are researching all of the available organizations that will accept your donated vehicle notice how many of their websites don’t provide an office address, a list of the people running the organization, copies of their IRS Form 990’s or a copy of their annual audited financials. Without these items to evaluate the organization you might as well be driving at night with your lights off! It’s important to know who you are giving your vehicle to and what they are doing with it. Don’t compromise on this point or your could find yourself without a vehicle, without a tax receipt and without any way to find out what happened or find anyone to help you.
If you determine that donating your car is right for you, Cars 4 Causes would be grateful for your vehicle donation. We would do our best to get you the highest tax write-off value and the most money for charity and to make your donation process as convenient and painless as possible. Best of luck with your decision and happy holidays to you and your family.
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