New Laws to Effect Charitable Vehicle Donations

Susan Frissell

More and more organizations are advertising for vehicle donations, from the American Lung Association to your local place of worship. Various foundations and organizations have discovered that accepting a vehicle from a private party yields some income for them.

I¹m often asked if this is a legitimate exercise, and if so, which organizations are the best ones to which a vehicle can be donated. There are web sites with information that is helpful along these lines. Keep in mind also that the rules for donating a vehicle and receiving credit for it on your tax return have changed.

The latest information regarding write-offs for vehicle donations has to do with a new law that states taxpayers will no longer be able to write off the vehicle’s Fair Market Value. Rather, the vehicle’s actual sale price from the wholesale auction is the amount acceptable. Far different than the Fair Market Value, the wholesale auction price more fairly reflects what a vehicle is worth.

This new tax law diminishes the write-offs of vehicle donations, in an effort to lessen a taxpayer’s deductions by 2.3 billion dollars over the next 10 years. The new legislation will go into effect January 1, 2005.

According to KBB, it’s still possible to get the vehicle’s Fair Market Value as a write off if you donate the vehicle by the end of the year, before the law changes. KBB has compiled a list to help taxpayers get the most from their donation, as well as how to accurately determine a car’s Fair Market Value.

1. Make your vehicle donation before December 31, 2004. To receive the vehicle’s fmv and allow charities to benefit, make your donation before the end of 2004.
2. Determine the vehicle’s fmv. By consulting kbb’s "private party" value you can accurately determine the value of your vehicle for donation. On their web site (www.kbb.com/donation) you will find The Used Vehicle Condition Quiz, and IRS tax forms to help you get the right price. Your vehicle’s current condition and mileage will also affect its worth.
3. Choose a charity you know and trust. Do your homework before making a donation. What is the charity’s purpose. Call the BBB to determine whether or not the charity you’ve chosen is a recognized organization, not a "sound-alike" charity.
4. Inquire about how much money the charity receives. According to a government report, more than $34 million was donated in automobile revenue in 2000. Only 32 percent of the gross revenue, however, was returned to the charity. To aid you in making a determination about which charity to choose, visit www.vehicle-donation.com.
5. Sign the Title over directly to the Charity or their Agent. Don’t leave the vehicle’s title blank under any circumstances. In fact, if the charity asks you to do this, go elsewhere. You could be liable for the vehicle long after its been donated.
6. Get a receipt. When making any non-cash contributions, be sure and ask for a receipt from the charitable organization including the name of the charity, their tax ID, date, location of the contribution, and a detailed description of the donation. You will need this information when claiming a tax deduction.