My wife an I are kicking ourselves. We were slack, and didn’t put the old Blazer on Craig’s List last January before gas prices exploded, and the ignition switch went crazy. So we lost our chance on getting anything close to full value for it. Anyhow, since we can’t sell it, we were thinking about donating it to NPR or Habitat for Humanity, but we were unsure of how much we would be allowed to deduct from our taxes.
Does anyone have the Straight Dope on donating one’s car?
I was looking into this as well. I checked details of a non-NPR donation place and found that they use a third party auction house that sends you a receipt for the actual price tha car sold for. This is different than prior years when people made their own claims of the car value, claims that eventually got the IRS pissed off enough that they changed the procedure.
I believe that NPR uses the same method but as I did not follow through with the process, I don’t know for sure. As the value was totally uncertain, and getting possible value is better than the tax deduction on the possible value, I decided I’d sell it on Craigslist. Problem is that I haven’t done that yet and the extra car has been taking up driveway space for six months now. :smack:
Let me add to what Mycroft H. provided. The IRS did indeed change the rules. There are now two different ways to deduct the donation, depending on how the charity benefits.
First, if the charity just sells the car, your deduction is whatever cash value the charity got.
Second, if the charity actually uses the car, or provides it to someone as part of their mission (i.e., giving cars to abused women), then you can deduct the market value of the car. Certain documentation is required from the charity if you do this. I am not sure what documentation the IRS requires to back up what you claim as market value.
Now, one would think that if a car is sold, the proceeds would be equal to the market value of the car, so one wonders why these two methods would yield different results. IMHO most people overstate the value of their cars, so they prefer to use “market value” instead of what their car is *really *worth, which is scrap for parts.
Donating a car for a tax deduction may seem like a good idea, but I would caution you to make real sure the title is transferred. I donated one and it was found on the side of the road in NJ almost a year later. No tags but the VIN number was traced to me as the last legitimate owner. I had to pay about $200 in tow bills and go through heck getting it out of my name.
That’s a good point, but how do you do that? I donated a motorcycle to Goodwill once. I signed the title over, but have no idea how I could ensure that they retitled it.
Also, one other point. If you donate a car and take a deduction equal to the market value, that value should be the same price you could sell it for, by definition. So economically, you would be better off selling it. Maus Magill, why can’t you sell it? Do you mean you can’t sell it for what you *wish *it were still worth?
Not a car, but a lawn tractor, that I donated to a local church. I took a deduction on my taxes for a certain amount. About 8 months later I received an inquiry from the IRS asking how I’d arrived at the claimed deduction. I sent them a note saying it had been based on what a dealer would allow on a trade in towards a new unit of the same make.
Never heard from them again. Their procedures may have changed by now though.
My brother also went through something like that recently. He donated his car through some organization that advertises heavily in the DC area, then got a call about ten days later from someone claiming to be a PI, telling him that his car had been abandoned on some side street. He then had to go through a bunch of hoops to get the organization to confirm that title had been transferred and that he was no longer the owner of the car. I believe he did so by getting a certified letter from the organization, but I could be wrong.
It’ll be difficult to sell for two reasons.[ol]
[li]It’s a ten year old SUV. With gas prices they way they are, I don’t think you could give one away.[/li][li]The ignition switch in the steering column is shot, so it won’t start, and to fix (Assuming I don’t want a face full of airbag.) Would involve towing and more cost than we really want to spend.[/li][/ol]
If we had not been so slack and sold it last spring, we could have gotten $3000 for it. Now, I doubt we’d get half that.
This seems to be stunningly common - friends of ours (also DC metro area) donated an old junker, and a few months later got called by the DC police or some such, wanting them to pay for storage of this car that had been towed a month or so earlier. Do these charities not bother to register the cars or something? Is there some industry aimed at buying and abandoning donated cars? The friends happened to have their paperwork in which they got a receipt from the charity, so they could prove the car was no longer theirs; if they hadn’t had that, they’d have been on the hook for hundreds of dollars. Makes me want to never donate a car, myself!!
Yes, the charities usually do not re-title the vehicles into their name, since they are just planning on selling them at a used car wholesale auction. No point spending money & time on doing the title change twice. So all the paperwork, including the title stuff, goes to the new buyer at the auction.
Unfortunately, these wholesale auctions are places where unreliable people are looking for ‘junkers’ to drive for a while (uninsured, often unlicensed driver). They do not want the car titled in their name (often can’t get a title, because of the lack of insurance or a valid drivers license), because leaving it abandoned somewhere when it breaks down is their normal procedure.
Also buying at these auctions are unsavory used car dealers, many of whom don’t want to spend the money on titling the cars in their name (and don’t want the IRS to be able to use titles to match to the sales they are reporting on their taxes). So they just hold that paperwork to let the buyer re-title it into the buyers name. But sometimes their buyers are the same types as mentioned above, who have no intention of getting a car title in their name.
So, unfortunately, it’s possible that your donated car may come back to haunt you this way. But the same is true if you just sell it over craigslist or whatever – you do need to make sure that the title is transferred. The best way to do that is to do it yourself as part of the sale.