In the past, donating
a car, regardless of its value or condition, was a very popular way to reduce
your income taxes by thousands of dollars, even if the charity was not so
fortunate. Well, the government caught
on to this and put a limit to the tax deduction you could take for a car
donation. Instead of allowing the donor
to deduct the fair market value of the vehicle, as before, the deduction is now calculated by the amount of proceeds gained by the charity and documented by a receipt from
the charity.
Quite often, a donated car will sell at
auction or charity sale for an extremely low price - even less than $100! Well, needless to say, donating an old car
for a sweet tax deduction now leaves a bad taste in the taxpayer's mouth. On the other hand, there are several good
reasons to donate a car to charity. An
old junker is not going to bring in much of a profit when sold by the owner,
especially when you consider the time it remains an eyesore in your front
yard. There is also the hassle of making
sure the buyer transfers the title out of your name to eliminate any liability
should they get into an accident. So,
by donating your junk car to a charity, though the tax break is small, there is
no liability, you have helped to support a worthy cause and do not have to deal
with getting rid of an unwanted car that isn't going to sell for much anyway.
So why donate your car to charity if there is
a chance you can profit more by selling it?
First and foremost, you get to avoid the
trouble of selling the car, advertising, meeting with buyers, worrying about it
every time someone takes it for a test drive, answering countless questions,
haggling over the price, making sure all the I’s are dotted and T’s are crossed
when you finalize the sale. You have
better things to do with your time and a charity is happy to get whatever they
can to further their cause.
The tax deduction; though not as profitable
or easy to claim as in the past, as long as rules and guidelines are met it is
still possible to come out ahead and owe less income taxes.
The satisfaction of helping a worthy
cause. Most people are happy to donate
to a charity that they care a great deal about.The charity can sell the car to
further their cause or put it to use within their charity.
Donating a car to charity can be easy and
profitable. If the vehicle is not derivable, many charities will send a tow truck out to collect it at no cost to
the donor. Of course, your tax deduction
will be reduced by expenses incurred by the charity, but any deduction is
better than none and they are glad for the donation.
If the car is in very bad shape, they can
sell it for parts or scrap. Even if you
end up with little or no tax deduction, you have still supported a charity you
respect and got rid of that junk car which was useless to you.