What is car donation? It is the practice of giving away old and no-longer-wanted automobiles to charity organizations. In many countries, charitable donations provide a tax benefit. Because of the act itself and its nature, this type of giving has become very popular. In United States, for values less than $500, the value of the tax deduction comes from the donor's own estimate of the car's value, even if the charity organization receives less money from actually selling the car. Over this amount, deductions for donations are limited to the sale amount of the vehicle. There were some critics, most of them claiming that this is essentially a tax shelter. However, the fact is that non-profit charity organizations in the United States have come to rely very strong upon the revenue from car donations. In many states, this type of donation has become increasingly widespread. For example, in 2000, 733,000 taxpayers reduced their taxes by $654 million.
Many non-profit charities run donation programs. While most of them have their donations processed through auto auction companies, some have their own car lots which sell the donated cars. The processing companies are collecting and selling donated cars. They then distribute the money to a charity the donor indicates. The processing companies normally share a percentage of the sale value of the car. These programs are suited very well for charities without their own facilities or staff dedicated to automotive donation fund raising, because they allow them to benefit from vehicle donation programs.
Car donation is advertised as an easy way to dispose of an old car. But every donor needs to fulfill certain post-donation requirements in order to qualify for the tax deduction. These requirements are such as obtaining a written acknowledgment of the car's subsequent sale by the charity, itemizing instead of taking the standard deduction, and some others. It is then up on donors to investigate how much money from the sale of the car goes to the processing company and how much actually benefits the charity's programs. Ideally, every donor should do this investigation.
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