Donating An Old Beater To Charity
The tax rule changes of 2005 have certainly affected the donation of cars to charity. Prior to this time a car donation resulted in a tax deduction equal to the fair market value of the car, no matter how the car donation utah. This meant that you could donate a car with a market value of $2,500 and the charity could sell it for $1,000. No matter what the sales price, the donor could deduct the $2,500 from his taxes.
Now the amount that the taxpayer can deduct is dependent on what the charity does with the car. If they use the car in their charitable work, make improvements to it or give it to a needy individual, then the taxpayer can deduct the fair market value of the car. If they sell the car, the taxpayer can deduct the selling price of the car or $500, whichever is the greater amount.
This tax rule change has severely affected the donation of cars.
Let's concentrate on the $500. The rule says $500 or the selling price of the vehicle, whichever is greater. This rule would encourage the donation of "old beater" type cars to charities. Even if the charity can sell the vehicle at auction, it still won't bring in the kind of money that newer more expensive cars do.
So even if there is a larger quantity of lower value cars being donated, the charity has the problem of what to do with them and still has a lower level of dollars from the sales. The logical action for charities in this situation is to develop programs providing vocational training for the needy in the field of auto repair.
This would accomplish several things: it would teach the disadvantaged a trade and make them employable; the improvements to the vehicles would result in a higher selling price; the donor could then deduct the market value.
This would result in more dollars in sales from donations and probably more cars being donated because the vocational training puts them in the category of the fair market value deduction.
This wouldn't restore either the charity or the taxpayer to the pre-2005 position, but it seems it would benefit both of them. And there would be an additional group of beneficiaries - the people who are receiving the job training by being taught how to do car repairs.
Now the amount that the taxpayer can deduct is dependent on what the charity does with the car. If they use the car in their charitable work, make improvements to it or give it to a needy individual, then the taxpayer can deduct the fair market value of the car. If they sell the car, the taxpayer can deduct the selling price of the car or $500, whichever is the greater amount.
This tax rule change has severely affected the donation of cars.
Let's concentrate on the $500. The rule says $500 or the selling price of the vehicle, whichever is greater. This rule would encourage the donation of "old beater" type cars to charities. Even if the charity can sell the vehicle at auction, it still won't bring in the kind of money that newer more expensive cars do.
So even if there is a larger quantity of lower value cars being donated, the charity has the problem of what to do with them and still has a lower level of dollars from the sales. The logical action for charities in this situation is to develop programs providing vocational training for the needy in the field of auto repair.
This would accomplish several things: it would teach the disadvantaged a trade and make them employable; the improvements to the vehicles would result in a higher selling price; the donor could then deduct the market value.
This would result in more dollars in sales from donations and probably more cars being donated because the vocational training puts them in the category of the fair market value deduction.
This wouldn't restore either the charity or the taxpayer to the pre-2005 position, but it seems it would benefit both of them. And there would be an additional group of beneficiaries - the people who are receiving the job training by being taught how to do car repairs.