Some Facts About Car Donation

Car donation is quite in vogues nowadays as people can combine philanthropy with sound economic sense to make a good deal out of donation. There are times when your old car gives signals that its time is up and that its time to wave it a firm goodbye. Now sending the car to the dump may not be a great idea, when it has still some miles and some value left in it. Car donation could be just what you are looking for. There are many charities that have been notified as the IRS as being eligible for car donations and these donations make one eligible for tax deductions.

There was a time when the government allowed people to claim a tax deduction on the fair market price of cars. For instance if the market value of the donated car was $3000, assuming a 33% tax bracket, a person would claim up to $1000 as tax benefit. But this was leading to a lot of people (millions of Americans) donating their cars to charities in order to avail of what was derisively known as a kind of ‘tax shelter'. This could have been due to ignorance or greed too. The government was not gaining too much and it was losing millions of tax dollars due to car donation.

It was not like the charities were making too much money. The donated cares were not in too great a condition and hence the actual price that the charities got was quite less. Again most of the profits were pocketed by the middlemen or agents who gave the charities just peanuts. So car donation was really not aiding anyone apart from the donors who had taken this as a great way to lessen their tax liability. So the government changed the rules in 2005 and limited the price for which fair value could be charged to $500. For amounts higher than $500, the car donor would have to get the real auction value certified by the charity that he/she had donated to. They also did not have the benefit of knowing the price of the car before the donation was made.

Car donation was sought to be streamlined but it ensured that people who had cars worth $ 2000 - $300 no longer donated their cars. This gravely impacted those middlemen who were making lots of money through car donations. The cars that came through the doors was worth only $250 - $300 making a lot of dealers in donated cars look at reducing costs and overheads in a jiffy. A lot of charities also now have their own parking lots where they auction cars so as to minimize costs. A lot of charities are also now giving the cars donated away for free to needy people who can go get jobs and become financially independent. This way, the IRS allows greater flexibility to charities that use the cars to further their own causes instead of just auctioning it for money. Car donation is this back in vogue.