Car donation
Encyclopedia
Car donation is the practice of giving away no-longer-wanted automobile
s or other vehicles to charitable organization
s. In the United States, these donations can provide a tax
benefit and have become very popular.
. However, non-profit organizations in the US have come to rely increasingly upon the revenue from car donations. This type of donation has become increasingly widespread; in 2000, 733,000 U.S. taxpayers reduced their taxes by $654 million.
tax returns instead of taking the standard deduction
.
For vehicles valued at less than $500, the deduction amount comes from the donor's own estimate of the car's value, even if the charity receives less money from its sale. Deductions greater than $500 are limited to the proceeds of selling the vehicle, usually at auction
. The U.S Internal Revenue Service advises that starting in 2005:
For vehicles valued at over $500, taxpayers are required to attach the charity's written acknowledgment to their tax return.
Ideally, donors should also investigate how much money from the sale of the car goes to the auction processor and how much actually benefits the charity's programs, as opposed to its administrative overhead.
Automobile
An automobile, autocar, motor car or car is a wheeled motor vehicle used for transporting passengers, which also carries its own engine or motor...
s or other vehicles to charitable organization
Charitable organization
A charitable organization is a type of non-profit organization . It differs from other types of NPOs in that it centers on philanthropic goals A charitable organization is a type of non-profit organization (NPO). It differs from other types of NPOs in that it centers on philanthropic goals A...
s. In the United States, these donations can provide a tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
benefit and have become very popular.
In the United States
Some critics have claimed that car donations are essentially a tax shelterTax shelter
Tax shelters are any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments...
. However, non-profit organizations in the US have come to rely increasingly upon the revenue from car donations. This type of donation has become increasingly widespread; in 2000, 733,000 U.S. taxpayers reduced their taxes by $654 million.
Tax considerations
Although advertised as an easy way to dispose of an old car, donors need to fulfill certain post-donation requirements to qualify for the tax deduction, such as obtaining a written acknowledgment of the car's subsequent sale by the charity, and itemizingItemized deduction
An itemized deduction is an eligible expense that individual taxpayers in the United States can report on their federal income tax returns in order to decrease their taxable income....
tax returns instead of taking the standard deduction
Standard deduction
The standard deduction, as defined under United States tax law, is a dollar amount that non-itemizers may subtract from their income and is based upon filing status. It is available to US citizens and resident aliens who are individuals, married persons, and heads of household and increases every...
.
For vehicles valued at less than $500, the deduction amount comes from the donor's own estimate of the car's value, even if the charity receives less money from its sale. Deductions greater than $500 are limited to the proceeds of selling the vehicle, usually at auction
Auction
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...
. The U.S Internal Revenue Service advises that starting in 2005:
For vehicles valued at over $500, taxpayers are required to attach the charity's written acknowledgment to their tax return.
In the United Kingdom
Car donation schemes in the UK are slightly different to those operating in the United States and only established themselves as a valued source of income for UK charities in January 2010, led by Giveacar – a non-profit organisation. Operating as a non-profit organisation allows charities to avoid the large overheads created by profit-making car donation companies. In addition, whereas car donation in the US has been incentivised through tax breaks, in the UK there are no such tax benefits to donating your car.Benefit to charities
Many charities run donation programs. Some have their own car lots which sell the donated cars but many have their donations processed through auto auction companies. Many processing companies also collect and sell donated cars and distribute the money to a charity the donor indicates. The processing company typically takes a percentage of the sale value of the car, but these programs allow charities without their own facilities or staff dedicated to fund raising to benefit from vehicle donation programs.Ideally, donors should also investigate how much money from the sale of the car goes to the auction processor and how much actually benefits the charity's programs, as opposed to its administrative overhead.
External links
- Charities see little from car donations, due to high overhead, Hackensack Record, May 10, 2008
- "Are donated autos helping needy kids?", North Jersey Online, January 2008
- George WillGeorge WillGeorge Frederick Will is an American newspaper columnist, journalist, and author. He is a Pulitzer Prize-winner best known for his conservative commentary on politics...
, "Charity Should Begin in Congress" - "Does Charity Car Donation Still Make Sense", Edmunds Online, April 2009
- "USA Today Article on Car Donation"
- "Unwanted wheels improve fortunes for charities"