For over two decades, making a vehicle donation to an African Charity has been favored for those trying to get rid of that old unwanted car.
Many benevolent organizations across the country have become quite dependent on the funds raised thru vehicle donations. So much that the rise of numerous vehicle gift processing companies have begun to fill the auto-grade landscape, giving way to many options for charities and donors equally. Unfortunately, many of these companies have become complacent in how they approach your vehicle donation, resulting in low sales numbers, meaning marginal write-off potential.
VEHICLE DONATIONS – a quick glance returning
In the early years of 2000, this landscape had been for rock solid foundation with nothing standing in its way. Next signs of economical instability turned into governmental concerns and eventually produce governmental action.
Ultimately it was the findings of the Senate Finance Committee’s investigation by the GAO (U. S. Normal Accounting Office), spearheaded by its chairman Iowa’s Senator Grassley, who had uncovered a multitude of car donation abuses.
By using part of their investigation focusing on the tax year 2000, results came in claiming approximately 6% of all non-cash beneficial properties over $500 reported on returns that year were definitely for vehicle donations. Their analysis estimated vehicle charité deductions lowered taxpayers’ income tax liability by $654 trillion that year alone.
The GAO study tracked your judgmental sample of 54 donated vehicles for that year or so to compare the amount of proceeds the charities received from car sales and the amount claimed as deductions on donor’s tax returns.
The findings raised eyebrows. From the sample with 54 donated vehicles, the charities only received five per cent or less of the actual value the donor have claimed as a deduction on their tax returns.
They identified not one but two factors that contributed to this difference.
1 . Donated cars or trucks were often sold at wholesale prices rather than at the amount the donor might expect if selling the vehicle to the private party.
2 . Vehicle processing and fund-raising expenditures are subtracted from gross vehicle sales revenue; additionally reducing the proceeds charities receive from vehicle profits.
They also indicated that they were unable to determine whether individuals boasting deductions for donated vehicles accurately assessed the rational market value of their vehicle, because data as to the vehicles affliction was not available. However they mentioned some charities they evaluated stated some of their donors’ claims about vehicle value has been inflated.
The GAO’s 43 page findings and choices were very detail oriented and what Congress eventually accredited was included in the American Jobs Creation Act of 04. The final version of the changed law took effect pertaining to tax year 2005.
Charity Car Donation TAX LEGISLATIONS OVERVIEW
THE OLD DAYS (tax year 2004 and older)
A taxpayer could claim fair market value for any motor vehicle donated to charity up to $5, 000 accompanied by a receipt with the charity, regardless of what the charity sold it for. Virtually no reporting requirement on behalf of the charity.
Anything over $5, 000 still required a receipt from the charity, coupled with IRS tax form 8283 and a required third party evaluation. The charity was required to submit IRS form 8282 once the vehicle sold.