I have previously recommended donating an old car as a charitable deduction to lower your tax liability. This raises some questions about car donation centers.
A car donation center is basically a middleman operation between you and the charitable entity that will benefit from your donation of your old vehicle. They will pick up the car and transport it. They will take responsibility for filing and detailing all the necessary documentation of your donation. They even hold auctions to sell off the automobiles and turn part of the proceeds over to non-profits for their charitable endeavors. Many small charities find the costs of selling off donated cars prohibitive and enlist the services of these centers to do the work for them.
Of course, these sort of operations open up all kinds of possibilities for fraud. If you are considering donating an old vehicle through such a car center, you should check on their reputation. Ask the car donation center for a list of all of the charities that benefit from their operation. Contact those charities and find out if they do indeed work with that particular center. If they do, ask if they feel that are being treated fairly by the car donation center.
Then, check out the charities themselves with the IRS. If you contact the Internal Revenue Service and ask for a copy of publication 78, which is the Cumulative List of Organizations, you will find almost all the qualifying charities in the United States. Check the charities that the car donation center works with against this list.
It is also good to know the exact value of the car you are donating. You can determine this by checking the Blue Book value of the car. The Blue Book is a well-recognized method of establishing the value of an automobile. Insurance companies and car dealers from one end of the country to the other use it. The Internal Revenue Service should have no problem in accepting the Blue Book value of your car as a basis for a deduction for charitable giving.
Also, be aware that when you file your income tax return claiming this particular charitable donation, you will need to attach an Internal Revenue Service form to your filing if the car’s value was estimated at or above five hundred dollars.
There may be a few hoops to jump through, but donating an old vehicle to a charity is a good act and it will help you lower your tax liability in the long run.