You are not necessarily entitled to a chunk of change by simply giving a car to the Boy Scouts; rather, you must go through the right steps. When considering an automobile donation for a tax deduction, you must do your research. You should be aware that not all charitable-sounding organizations are qualified by the IRS for deductions, and that which the organization does with the car donation has an effect as well.
As stated in the Charitable Contributions form of the IRS, the following are places to which you can offer auto donations for deductions:
- Religious organizations
- Federal, State or local governments, if the donation is for public purposes
- Nonprofit schools and hospitals
- Public parks and recreational facilities
- Salvation Army, Red Cross, Good Will, United Way, Boy and Girl Scouts of America, etc.
- War veterans’ groups
If the organization to which you are donating is not already on this list, you can ask the organization if they are qualified for car donations. It is a good idea to double check with the organization no matter what. A copy of the organization’s Internal Revenue Service Determination Letter should be available upon request, which will show whether or not the organization is tax exempt or not. The organization can also provide you with their latest annual funds report and IRS Form 990, which details funds from the past fiscal year.
It is also important to find out what the organization intends to do with the automobile donations. Some charities use donations in some form of their program’s service, such as transportation for equipment or for a needy family. Other times, these donations are gathered for means of sale and profit for the organization. If the organization is operating all sales of auto donations, there is no worry for the status of your deduction. However, if the selling is controlled by an outside seller, the charity organization may only receive a percentage of the actual sale. The organization should divulge the financial information, but if they don’t, ask.
A receipt to verify the contribution is a principal necessity, so you should make sure the organization will give you one. For donations that need to be towed-in, receipts may have to be mailed by the charity to you.
Another notable factor to remember when donating a car is that you, the donor, are responsible for the accurate value of the car. Most car companies will be able to provide an appraisal process for a small charge if not for free. And according to the IRS, car donations over $5,000 are required to include an appraisal by a qualified service person. Appraisals involve the overall evaluation of the automobiles to be donated. Companies who offer appraisals determine the retail value and current condition of the car, as well as fill out all the necessary paperwork to be sent to the IRS for clearance. Any appraisal fees for automobile donations are not deductible.
By Monica Drusch