Donating A Car To Charity
What can sound nobler than donating a car to charity? It solves the taxpayer's problem of what to do with the old car. It saves him the trouble of having to sell the car in the open market. The donation allows for a tax deduction and the charity has dollars that it wouldn't have had without the donation.
Current tax rules allow for a tax deduction of $500 or the actual selling price of the salvation army auto donation if the charity sells the vehicle. The taxpayer can take which ever amount is greater. The taxpayer cannot automatically claim the market value of the car, as he could in the past.
The only way the taxpayer can deduct the market value is if the charity uses the car in its charitable works, improvements are made in the vehicle before selling the vehicle, or the vehicle is donated to a needy individual. All of this must be documented for the Internal Revenue Service.
Government investigations revealed the existence of corruption in the practice. Most organizations that accept donations of vehicles make it as easy as possible for the donor. They make all of the arrangements for transporting the donated vehicle and for repairs, if they are needed. This means there were a lot of middlemen involved.
This is where the government found the corruption. The burden of the corruption was on the charities that received huge bills for transportation and were told cars were inoperable so they would sell at a lower price at auction.
For example, a fuse would be pulled so the car wouldn't function. It would sell for a lower price when the charity auctioned it. A cohort of the middleman would buy the salvation army auto donation, reconnect the fuse and then resell it at the market value.
Both the car donor and the charity were on the losing end of this whole scheme. The middlemen and their cohorts were the gainers. Charities would end up losing money on some of the vehicle donations in this way.
The change in the tax laws changed a lot of these practices. The changes certainly resulted in fewer car donations. But it is still possible to donate your old vehicle to charity and they can still sell it at auction and benefit from the proceeds of the sale. It is still a noble contribution for the donor. He just doesn't obtain the kind of tax benefit that he used to be able to.
Current tax rules allow for a tax deduction of $500 or the actual selling price of the salvation army auto donation if the charity sells the vehicle. The taxpayer can take which ever amount is greater. The taxpayer cannot automatically claim the market value of the car, as he could in the past.
The only way the taxpayer can deduct the market value is if the charity uses the car in its charitable works, improvements are made in the vehicle before selling the vehicle, or the vehicle is donated to a needy individual. All of this must be documented for the Internal Revenue Service.
Government investigations revealed the existence of corruption in the practice. Most organizations that accept donations of vehicles make it as easy as possible for the donor. They make all of the arrangements for transporting the donated vehicle and for repairs, if they are needed. This means there were a lot of middlemen involved.
This is where the government found the corruption. The burden of the corruption was on the charities that received huge bills for transportation and were told cars were inoperable so they would sell at a lower price at auction.
For example, a fuse would be pulled so the car wouldn't function. It would sell for a lower price when the charity auctioned it. A cohort of the middleman would buy the salvation army auto donation, reconnect the fuse and then resell it at the market value.
Both the car donor and the charity were on the losing end of this whole scheme. The middlemen and their cohorts were the gainers. Charities would end up losing money on some of the vehicle donations in this way.
The change in the tax laws changed a lot of these practices. The changes certainly resulted in fewer car donations. But it is still possible to donate your old vehicle to charity and they can still sell it at auction and benefit from the proceeds of the sale. It is still a noble contribution for the donor. He just doesn't obtain the kind of tax benefit that he used to be able to.