Now that the rules have been changed regarding the donation of vehicles, boats and trailers, the rules have changed on both sides of the charity organizations that have always been the central concern in the minds of donors.  Indeed, these rule changes were designed by the IRS to help ensure that more money from the sale of an auto or boat is directed at the charity itself and not just the third-party (usually for-profit enterprise) agent that handles the sale.

While non-profit (NPO) and charity organizations have been taking durable and appreciated goods as donations for a very long time, a major change in the tax laws that govern vehicle donations in 2005 have led to a new set of paperwork and documentation that you can expect from the charity organization you choose.

When you contact the charity organization of your choice or answer an ad calling for your unloved and unused boats and autos, you will very often be asked to vouch for its condition.  You should also be asked about the make a model of your automobile or boat.  This will help the charity determine if the vehicle is likely to warrant an independent appraisal or not.  This independent appraisal must be carried out within 60 days of the title transfer and must be done by an authorized appraisal agency, as approved by the IRS.

If a non-cash donation is likely to be valued at $5,000 or greater, such an appraisal is a necessary part of the documentation you’ll be required to present to the IRS along with a fully filled in Form 8283 (section B).  It’s often a good idea to take some pictures of such a high-value donation to your favourite charity organization, too.

The next most important thing you can expect from your charity organization of choice is a receipt of title transfer and a statement of intent.  They are required to deliver such documents to you within 30 days of receipt.  Generally, the better the condition of the vehicle you’re donating, the more likely it is to be used, as is, rather than being sold at auction.  This means that you have a much better chance of being able to claim a much higher legitimate deduction.

When you receive your invoice of intent from the charity organization, you’ll notice that it should outline the conditions by which the donation was made.  For instance, the IRS cannot tax non-tangible benefits such as your personal satisfaction, but they can make adjustments to your allowable deduction (in the form of an audit) if you’ve received any type of gift from the charitable organization that can have a value reasonably ascribed to it.  If you got as much as a calendar or a coffee mug in return, make note of it and subtract its fair value from your deductible.

If the charity organization ends up selling the car within two years of receipt, even if it has been used during that time to fulfill the charitable mission, you will receive a notice of sale (Form 8282) within 30 days of the sale.  That doesn’t mean you have to do anything to change the deduction you’ve already taken nor, are you able to take a second deduction.

Remember, if you’re donating an automobile, boat or RV to a charity organization, you won’t be able to claim any sort of deduction unless you file with a list of itemized deductions (as opposed to the standard deduction that applies, depending upon what status you choose to file under).  Many people find that since they don’t have any other legitimate deductions in a given year that it actually saves them money to forget that the donation ever happened.  In fact, when the GAO investigated filings from 2000 (even before donation deductible oversight was in place) as many as 15% of donors didn’t even bother taking itemized deductions.

However, regardless of how you choose to file your own tax returns, the charity organization you choose is beholden to provide you with all the documentation you’ll need to make sure the maximum possible deduction benefit allowed under law is yours.

There are many reasons why needy families in your community can benefit from charitable donations of your old automobile.  Much of this is rooted in the free market economy that dominates in the United States, sometimes despite the best interests of low-income workers that make up the bottom of the labor pyramid that drives consumer spending and business revenues.  Add a hot real estate market that has led a renewed flight of entry level jobs from densely populated urban centers that are well-served by public transit, and you have a crisis situation for many such workers that can only be solved by charitable donations.

It’s not just people on welfare that are in desperate need of charitable donations in the form of food aid and autos.  There are millions of gainfully employed persons in the US who are unable to meet even their  most basic needs.  Welfare reform in the 1990s led to a vast increase in

Recent moves by the Bush administration to reclassify poverty are not fooling anyone living that nightmare.  Despite cheery headlines to the contrary, the poor are getting poorer and there are fewer people interested in their plight than ever before.  Perhaps it’s because so many who consider themselves “middle-class” are beginning to struggle as only the poor had once. 

Perhaps it’s due to vitriolic rhetoric coming from neo-conservative mouthpieces and politicians who decry any use of public funding to support people not entirely like themselves.  Perhaps it’s just easier to assume that anyone can make it in America.  Well, anyone can, but the cards are definitely stacked against those with low incomes.  Anyone who has ever investigated taking out a payday loan to buy groceries or relies upon credit cards to make ends meet can attest to that.

Regardless of the reasons why charitable donations of automobiles are in such high demand, they are desperately needed by an ever-increasing segment of the working populace.  This problem is exasperated by the premium paid to workers who are able to navigate outside the areas of public transportaion.  Having a vehicle not only means that workers are able to free themselves from the whims of late trains and missed bus transfers but also, the ability to take higher paying work and finally crawl out of the hole and become more fully contributing members  of society who are not dependent upon charitable donations of anything.

That said, it is imperative that one find an organization that is capable of taking charitable donations of automobiles and giving them directly to needy individuals and families that need them.  Not only does this give you the satisfaction of knowing your charitable donations remain in the community, but you also can rest assured that you’ll be able to take the full, fair-market value of your charitable donations that can represent a significant increase over the wholesale auction price that is often given.

Even if the car is eventually sold at a deep discount to the organization’s constituents, you may still claim the full value, as long as it’s not sold to a member of the general public.  If repairs are made to one of your vehicular charitable donations before use, you’re still able to take that fair market donation for what condition the car finally appeared.

Indeed, organizations that provide automotive transport have classically been those that chiefly benefited from these types of charitable donations.  Whether they exist to transport a needy individual to doctors appointments, a school of higher learning or even just keeping someone in touch with their linguistic community once they’re had to move away to take work elsewhere.

Charitable donations of automobiles also have the advantage of giving a segment of the population a sense of freedom that their low-wage jobs don’t often afford.  It’s this sense of individuality that has made the US the crucible of self-determination that is envied the world over.  Even if you didn’t stand a very good chance of increasing your personal tax exemption with charitable donations of cars and trucks, creating a future population base that is fully contributing to the national economy is useful to everyone.

According to the General Accounting Office’s (GAO) 2003 report to the Senate Committee on Finance, the incidence of mis-reporting from car donation programs was out of control.  In 2005, some changes were made to the rules that govern car donations and the subsequent deductions that are allowed. 

However, the report also showed that an alarming 95% of third-party agents that facilitated the donations for perfectly legitimate charities and non-profit organizations (NPOs) were for-profit organizations that ate up as much as 70% (and sometimes even more) of the profits from the sale of donated automobiles.  This means that a very paltry amount of the proceeds from such sales were actually reaching the charities.

Since the 2005 changes took effect, the previously very lucrative business of selling donated cars for IRS authorized charities that didn’t have in-house resources for dealing with automotive donations, has become somewhat less profitable.  As such, the proportion of third-party car donation programs that operate for profit has declined.

That doesn’t mean you don’t have to be diligent about the type of car donation programs you look into when deciding to donate a used car to charity.  There are still several states (many of them in the Western United States) that don’t require such car donation programs to register with the state Attorney General’s office.  If you live in one of these states, you’ll have to be very careful about the ultimate use of your car, since the amount you’ll be able to legally deduct without attracting the attention of auditors is tied its use.

For starters, you should check all car donation programs to see that they are actually representing charities and non-profits that are sanctioned as charitable organizations by the IRS.  If in doubt, ask someone at the charity in question how their relationship with the third-party agent works.  If they are not in control of the program, there could be room for citing exorbitant overhead costs, despite increased regulation of such overhead costs since 2005.

Car donation programs should be able to give you a good idea of how the donated car will ultimately be used.  Your benefit in the form of allowed deductions will be higher if the car is to be used by the charity itself (such as is the case with Meals on Wheels) or given to a needy family that needs reliable transportation.  If this involves fixing the car up before being given away, the value of the repaired car may be deducted. 

It also behooves a donor to inquire as to how the vehicle will be rehabilitated.  Car donation programs that are known for performing such repairs as part of an educational mission will make it especially easy for you to claim the fair market value of the car, even if it is eventually sold to someone (such as one of those needy families) at a deeply discounted rate.

If one of the car donation programs you’ve chosen doesn’t seem to be forthcoming with answers to your questions, check with the state Attorney General or other organization that is responsible for monitoring such agents.  Even in a state without such oversight, some private organizations, such as the Better Business Bureau, have their own lists of reputable car donation programs that may be better able to serve your charitable desires.  Indeed, this might be the best place to begin your search.

It is also useful to note that all car donation programs are required to give you a receipt within 30 days of picking up your car, though the receipt of sale is what you will actually use to value your donated automobile for deduction purposes.  If the charity in question will be spending some time fixing the car up or using it for their own charitable purposes, you should still expect some paperwork to that effect.  If you don’t get it within a month of your car donation, you should call to check up on the status of your receipt.

It has become far easier to check on the charitable mission of car donation programs in recent years.  A little bit of homework on your part will help you avoid unscrupulous car donation programs that have little, if anything, to do with the charities they claim to represent.  Check twice and donate once.

Not everyone has the time to deal with all the intricacies of preparing their car for sale, much less fixing up an old clunker to maximize their sale value.  This has historically been the job of a car donation program that is either run by a charity or non-profit organization (NPO).

Sometimes, NPOs use a for-profit third party to facilitate the possession and sale of truck and car donations.  Such unscrupulous programs that take advantage of the charities they are advertised to serve have been a less common though persistent problem since modifications were made to the tax code in 2005.  However, by carefully checking the details of any car donation program you decide to use, you can guarantee the majority of the proceeds from the sale or donation of your car goes right to the charity you choose instead of middle-men.

Indeed, though they once represented only about 4% of third-party donation agents that manage car donation programs, some are actually non-profit themselves.  You can check on this to make sure by asking for the organizations tax ID number and looking it up on the IRS website.

Using such a car donation program has the advantage of best utilizing the talents of those working for the charity you hope to donate to.  Especially now that the actual amount of your deduction is tied to the ultimate use of the automotive donation, it is in the interest of many such organizations to get the most practical use from your donation as possible.

And let’s be honest, most of the cars given to a car donation program are not in the best of shape, otherwise you’d not be getting rid of the car in the first place.  When the car isn’t even running well, the offer of a free tow from your location can be a good motivator.  However, in such cases, you might want to shop around to see if there’s a car donation program in your area that specializes in teaching people how to fix up old cars rather than just sell them to the nearest available scrap yard.

Sometimes, donated cars run perfectly well, though you’ve decided to upgrade.  This is common enough that many charities are constantly on the lookout for such car donations.  Programs that focus on road-worthy cars are often the very same ones that will find a practical use for your donated vehicle that will allow you to take the fair market value of the car for a deduction rather than a somewhat lower (often much lower) sale price that is paid for cars auctioned at wholesale.

Just because you don’t have time to deal with making the sale of the vehicle yourself doesn’t mean that you don’t want to make sure the charity you choose doesn’t get the highest possible benefit from your donation.  As such, you should never be afraid to ask a car donation program to tell you how they plan to use your vehicle.  If you don’t like what they have to say, go ahead and keep looking.  There are still plenty of charities (and their agents) that are legitimately hoping to maximize your value as well as their own.

One exception to the usual benefit of car donation programs is a vehicle that has actually appreciated in value over time.  Though this is not usually the case, some classic cars are subject to such appreciation.  If you’ve had the vehicle for more than one year and it has appreciated during that time, you may be subject to capital gains tax from the sale.

It is best to consult with an accountant to deterimine if the donation of such a car, whether you conduct the sale yourself and dontae cash or allow a car donation program to handle it is the best option for you.  Generally, donating the car itself is the best course of action, though again, its use has an impact on the amount you’ll be able to deduct from your taxes.

Car donation programs can take a lot of hassle out of your charitable donation of a vehicle.  By following some simple guidelines for choosing the best car donation program for your needs, you can maximize the benefit of your gift all around.

Not all car donation deductions are created equal – there are even cases where donating an auto in good faith can actually increase your tax owed under certain circumstances.  Like anything else involving the IRS, the burden of proof is upon you, so the more information and documentation you have to back up your car donation deduction, the better.

Thankfully, just as rules have tightened up for donors, the onus of documenting the ultimate use or destination of a donated car rests with the charity receiving your car donation.  Deductions are now tied to the ultimate use of the vehicle.  So, if the charity you choose or, the third-party (often for-profit organization) that acts as an intermediary between yourself and said charity, sells your car at a loss, you’d have a hard time claiming fair market value for such a donation.  The charity is required to give you a receipt stating the use of the vehicle within 30 days of donation, whether it’s actually met its final fate yet or not.  If it is used and later sold, you’ll receive a new receipt outlining this use, too.

On the other hand, if the charity you choose has a mission that includes using the donated vehicle to further their mission or they sell it at a loss to a needy family, you may still claim the “fair market value.”  This may, however, get your return some unwanted attention that you may not welcome for other reasons.  If this doesn’t sound like a good idea to you, it may be wise to consider something other than car donation for deduction purposes.

Indeed, it pays to be careful of who is receiving your donated auto.  This is especially true in the case of car donations and deductions taken from charities that are not recognized as non-profit organizations by the IRS.  This is easily checked, and doing so can save you a great deal of heartache later.  Charities are required to provide you with information regarding their non-profit status with the IRS and tax ID numbers you can check yourself with the IRS website.

Perhaps the most common happenstance where it doesn’t pay to donate a car is when the rest of your allowable deductions for a given year, when added to the car donation deduction, add up to less than the standard deduction allowed you.  Of course, this differs depending upon how you file.

For instance, if you file as a head of household you’ll have to come up with nearly $2,500 more than if you’d filed as single or married filing separately to reach that standard deduction amount.  This can be difficult for those who are simply working for a living as opposed to those who are self-employed.

It is also useful to note that the higher your tax bracket, the less a deduction will actually take off your total tax burden.  This is because deductions are taken from your net income, not the total tax as many suppose.  As such, legitimate car donation deductions are typically worth about a third after figuring out taxes, less if you’re in a higher tax bracket.

That said, in the case of a high value car donation, deductions can make the difference between paying in a higher or lower tax bracket.  This can have important implications on your total tax burden that far outstrip the actual value of the car donation.  Deductions may, on the other hand, have little or no effect on your final income bracket.

It’s always best to check and see how close you are to the edge of a more favorable income bracket near the end of a given year.  Since you’re allowed to make donations up until the 31st of December, as long as you get a certificate of receipt, it doesn’t even matter if the car is hauled away until the next year, as long as you have a piece of paper stating that the initial transaction occurred before the 31st.

However, the regulations that govern how car donation deductions can be valued have seriously impacted the once booming market of car donation.  Deductions have fallen sharply as well, and it is estimated that the IRS is now saving more than half a billion dollars per year in reclaimed revenues.  Aren’t you glad you could help?  You should be if your car donation deduction is actually a liability under the new rules.