Car donation has become a preferred way for people to dispose of off their old cars as it ensures the dual benefit of contributing to charity as well as getting the opportunity of tax deduction. The procedure for car donation is fairly simple. All you have to do is to contact a charity and they will be there to pick the vehicle up.
But the loophole in the entire process is choosing the right charity for this purpose. There are several frauds out there. Such fraudulent organizations may be good enough at convincing you about parting with your car and they will use the donation for all the wrong reasons.
So, it is important to know the best place to donate a car. The secret behind car donation is to get the benefit of tax deduction, which is becoming a booming business as far as tax savings for Americans are concerned.
The aim, therefore, is to maximize the amount, which goes to charity, as this will give them the maximum saving on tax. At the same time, the risk needs to be minimized so that the donation goes into the right hands.
There are many charitable organizations, which are involved in religious, social, or educational work, which may be suitable for donating your car. They either may use the vehicle itself for the transport of people or supplies or can use the sale price of the car as a donation.
Here are some tips on choosing the best place to donate a car:
1. Look For A Charitable Organization Which Accepts Your Donation Directly
A charitable organization, which looks after the sale transaction of the donated car by itself, would be the best place to donate the car because the entire sale proceeds will go to the charity. On the other hand, those charities, which employ an intermediate agency for completing the sale of the donated vehicle, will lose as much as half the sales proceed as a commission amount for carrying out the job. So, avoid those that appoint intermediates, and go for one that handles the job on its own.
2. Choose A Charity Which Accepts Cars For Donation
If you have a favorite charity, do not donate the car to it just for the sake of making the donation. Look for a charity, which does accept car donations and is reputed to do a good job in the area where you would like to help with your donation. Rather than going for swindles, get to know about reputable charities that are genuinely making positive contributions to a specific field. The research will help you find out about that.
3. The Charity Should Have 501 (C) (3) Status
Before you make up your mind about donating your car to a particular charitable organization, you must make sure that it has the status of 501 (c) (3). The best charity to donate cars to will have 501 (c) (3) statuses to facilitate your tax deductions. There are certain organizations, which may claim to be non-profit in nature, but those which come under 501 (c) (4) are actually not entitled to a tax deduction.
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4. For Those Organizations, Which Employ An Intermediary Agency, The Percentage Given To The Charity Must Be Researched
In case the charity has employed an intermediary agency to take care of the sale process of a car, the amount is negotiated between both these parties. Most of the time, the charity will work in favor of the mediating agency as it would not want to lose the share it gets from the sale of the car.
At the same time, the car donor should make sure that such an agency is chosen which gives the maximum amount of the sale proceeds to the charity so that the amount of tax deduction received by him is the maximum. In fact, action is being taken against some agencies that are actually cheating people into donating their cars through them in the name of charity, though a very small amount reaches them in reality.
5. Drive The Car To The Charity, Instead Of Having It Picked Up
The best way to donate the car to a charity is to drive it to them, instead of asking them to get it picked up or having someone else tow it. This will help you cut down the cost and maximize the amount, which goes into the charity in lieu of the donation.
6. Ensure That The Paperwork Of The Transfer Is In Order
When you give over your car to a charity, make sure that the transfer is done in the right manner with all the paperwork complete. Otherwise, you may have to suffer some adverse consequences in the future. For instance, if the car lands in the wrong hands and is used for the wrong purposes, you may be held liable if the title of the car has not been transferred from your name to that of the organization. The charity may sell off your car in the auction and the wrong person, landing you in a fix, may buy it.
Therefore, if an organization does not agree on the paperwork while getting a car donation, find another one for donating your car. At the same time, all your tax-related paperwork in relation to the donations should be handled properly so that you do not have to face any problems with IRS during your annual audits.
7. Get Your Car Valued Properly
When you have decided to donate your car, the IRS (Internal Revenue Service) keeps an eye on the valuation of the car so that you are not doing so to evade the tax.
The deduction in tax is actually given based on the exact price that the car fetches at the auction. On the other hand, if the car is used by the charity instead of being sold, its fair market value has to be calculated properly. The same happens if the car is sold off to a person with low-income resources. So, get your car evaluated properly before you donate it to a charity.
Knowing that car donation is as favorable for the donor as it is for the receiver, it is necessary for the donor to look for an honest and the right agency, which deserves to get the donation. In addition to getting the mental satisfaction of having donated his vehicle for doing a good job, the donor can also avail of extensive tax benefits. Following the above-mentioned instructions can help you choose the right charity, and to gain the maximum benefits out of the donation.