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.

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.

When giving its report on the rise of automobile donation to the Senate Committee on Finance in 2003, the US General Accounting Office (GAO) found quite a bit of discrepancy between the amount of monies claimed as deductions on individual and business returns and the monies reported from actual automobile donation sales by non-profit organizations (NPO).  As a result, certain changes were made to the existing tax laws that govern how deductions are claimed from automobile donation.

Though California was the only state that kept track of automobile donation proceeds at the time, it was found that third party organizations handling automobile donation usually took up as much as 70% of the amount received from the original sale of such a vehicle on the wholesale market.  The exact amount depending upon the arrangement between the automobile donation organization and the NPO. 

In California, third-party agencies that handle automobile donation are beholden to take only a given percentage of the sale, wholesale or not, as overhead expenses, no matter what those expenses actually are.  As such, higher prices for vehicles are often achieved in private sales in that state, though such sales often take longer than automobile donation auctions in other states.

When the Finance Committee heard these figures and many more that proved the federal government was bearing the brunt of these donations in the form of donation discrepancy, the process to clear this problem with auto donation deductions was initiated.  There’s nothing to get a sub-committee going like an estimated $600 million shortfall in tax revenues.

This is not to say that someone using the blue book value of their car to describe a barely running rust bucket given as a charitable auto donation is setting out to defraud the government, but it certainly has the same effect.  In that 2003 GAO report, the majority of tax returns investigated from 2002 showed an average actual donation to the charities of 1-5% of that reported as the original donation on the resultant tax forms largely due to the use of third party auto donation agencies and the use of wholesale and wrecking yard sales.

To this day, a large number of NPOs continue using third-party agents to facilitate auto donation.  The lack of communication as to where the actual overhead expenses of the third-party auto donation agents were almost entirely lacking in detail – instead, lumping all expenses under categories such as “towing” or “other.”  Indeed, bookkeeping has been a real problem with many of these setups.

In an effort to combat this discrepancy with auto donation, new rules were instated by the IRS that require a statement of monies received from the sale of the car, rather than the “fair market value” of the vehicle for vehicles netting over $5,000.  Because of this, many who consider auto donation as a viable source of deduction have grown suspicious of letting third-party agencies handle the auto donation process for them.

For instance, if you have a vehicle with a fair market value of $10,000 and sell it yourself, you’ll net about $10,000.  After you pay capital gains and income taxes on that amount, you should still have over $7,000 to donate to the charity of your choice, whether they take auto donations or not.  This does depend upon your tax bracket, but that full amount will go to the charity and be legally deductible.  A third party may be lucky to get $4,000 at auction and give less than $1,000 to your charity and giving a lower reported value to you.

On the other hand, since rules were tightened in the early ‘aughts by the IRS, vehicle donations of over $500 are officially valued for deduction purposes by their sale amount (usually at wholesale) or by an independent appraisal.  In fact, you must provide a copy of such an appraisal if your net auto donation is greater than $5,000.  Auto donations with a value of less than $250 are still allowed under the “honor system.” 

Regardless of the value of your auto donation, the title must be free and clear.  You are also responsible for providing the name and address of the charity, where the actual auto donation occurred (very often your home, if towed), a description of the car or truck and the date when the auto donation took place.  If the auto donation is valued there or after the fact at less than $250, you must also have a receipt.