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Follow these 5 crucial steps so you don’t fall victim to scams when donating cars for a tax deduction
Do you want to donate a used car to a charitable group to save money on your taxes? There are no shortage of people fighting for your donation! Sadly, the truth is that some so-called charities that dominate local commercials and billboards are quite different than their public image - they operate highly profitable businesses by taking advantage of the IRS rules that allow people to donate a used car for a tax deduction. These organizations do donate a bit of their profits to charity – if they didn’t they would lose their charity status with the IRS. But the amount they donate to charity can be incredibly low, sometimes as low as 1%. Some even form their own charity and staff it with people they know!
So how do you cut through the organizations living on the edge of charity tax laws and find a legitimate charity for donating cars? Here are 5 key points that will help you make certain your donation does as much good as possible when you donate a used car for a tax deduction:
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|Have an old car? Donate it where it will do the most good by following these 5 Steps.
1: Cut out the middleman
When donating cars, donate directly to the charitable organization whenever you can. Questionable car charity donation programs are almost always middlemen. They are glad to take your vehicle donation, sell it, donate a fraction to a charity, and pocket the rest for ‘operating costs’. When you donate a used car to a middleman, your donation gets eaten away twice, once for the overhead of the middleman car organization, and once for the overhead of the charity. Your gift goes much farther when donating cars to a charitable organization that takes vehicle donations directly, like Volunteers of America. An average of 88% of donations made to Volunteers of America go directly to locally run programs like emergency food and shelter for the homeless, permanent senior housing, job training for homeless veterans, domestic abuse shelters, youth programs and more in every area of the USA. From Los Angeles to Washington D.C., Philadelphia to Detroit to New Orleans, Volunteers of America provides the hope of a new life to nearly 2 million Americans every year.
2: Give your charity a check-up
Finding the best charity to donate a used car doesn’t have to be a stab in the dark – the internet has a couple of easy ways you can evaluate any charity you are thinking of donating cars to. The Better Business Bureau is a natural place to start. At bbb.org the Better Business Bureau evaluates charities on 20 Standards of Charity Accountability including how they spend their money, whether the organization represents itself honestly, and the charity’s willingness to disclose important information to the public. Another valuable resource for people looking to donate a used car for a tax deduction is GuideStar Exchange, found at guidestar.org. GuideStar's mission is "To revolutionize philanthropy by providing information that advances transparency, enables users to make better decisions, and encourages charitable giving." We display the Guidestar and Better Business Bureau seals on all our web pages, which link to their reviews of Volunteers of America.
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3: A bigger slice means a better place to donate
When donating cars for a tax write-off, the higher percentage of your donation that finds its way into programs that help the homeless or needy, the better. The Federal Government doesn’t have set standards for the amount that a car donation program has to contribute to charity - believe it or not, some actually give less than 10%. When you're deciding to donate a used car it is a good idea to take the time to investigate just what percentage of your vehicle donation will make its way into programs that help people. Respectable charities will offer that information on their website, or in an online copy of their annual report. You can also find it online through the Better Business Bureau or Charity Navigator. Volunteers of America puts an average of 88% of all donations to use in locally run programs – programs that provide hundreds of thousands of meals for the homeless, emergency shelter for tens of thousands, treatment and job training for our nations veterans who have fallen into hard times, youth programs, and even Adopt-a-Family programs that provide tens of thousands of kids with a Merry Christmas. Nearly two million people a year find hope in programs partially funded by people like you who donate a used car.
4: Look for local impact
If the charity you’re thinking of donating cars to is vague about the programs they offer and where they offer them, it can be a red flag. If you like the idea of helping people close to home, look for a charitable organization that runs programs in your area or state. You get another advantage when you donate a used car to a charity that offers community programs near you - you can drop in on the programs you donated to, and see your donation in action. Volunteers of America offers locally run programs from coast to coast that serve up hundreds of thousands of meals a year to people fighting the tough economy, offer shelter to the homeless, treatment for addicts and training for tens of thousands of people trying to make a better life for themselves.
5: Make certain that the charity is designated as an official 501(c)(3) charity by the IRS
If you’re interested in donating cars for a tax deduction, when you donate a used car make sure it goes to a 501( c )(3) charity - an official designation only the Federal Government can provide. If the car donation program you’re looking into doesn’t have a 501( c )(3) designation, your deduction may be disallowed, and you could end up writing the IRS a check for unpaid taxes, plus interest and penalties. If you want a tax deduction for donating cars, donate to an official 501( c )(3) charity.