Used Car Donations – Avoid the Pitfalls!
There are several factors to be aware of when you consider used car donations.
The very first thing that you need to be aware of is that the IRS will only allow the fair market value as your tax write off. These tax laws were changed because quite a few people were taking advantage of the huge write-off they received. It only takes a few bad apples to spoil the bunch.
Many times when a car is donated, the car is usually not what is used. Most of the time the organization will sell the car and place the proceeds toward the actual charity. What this means for you is that you will only receive a write off for what the car sold for, not for what the car is worth. For example, if you car is worth $10,000 and it only sold for $2,000, you can only write off $2,000.
When donating your car, be careful in choosing the charity. Of course there is great money potential involving used car donations, so charities will make this process as easy as possible. All you need is to provide a few details and with the click of a button, you are waiting for a tow truck to pick up your vehicle. There are 1000s of charities that do very well in touching your emotions, especially if you have had a love one to die and you have found a charity that helps to prevent that specific disease or illness they may have had.
With all of this said, there are many charities that are not legally registered as a non profit organization. Whenever there is a lucrative process, there will be a scam artist lurking in the shadows to prey on unsuspecting victims. Do your due diligence in getting the actual letter showing that they are a charitable organization. You will be sorry if you do not do this.
There are also many 3rd party companies that try to take all the hassle and stress away from you and will handle everything from picking up the vehicle, disbursing the funds, and also the car sale. You can come into an issue when the 3rd party starts loading up fees for their services. Before even dealing with a 3rd party company, find out in the beginning what you will have to pay them after the donation is complete.
Lastly, don’t count on the organization or the receiver to be accountable for any errors made with the fair market value of the car. You are responsible for this and will have to pay a penalty if the numbers are way off.
Regardless of how you choose to handle your used car donations, just be thankful that you have done something that will help out someone in the end.