New York, NY (September 25, 2008) - Getting mileage out of your used car by donating it to charity may still be possible as 2008 winds down. Although recent tax code changes have affected the way a taxpayer can deduct a vehicle donation from taxable income, donors can still get the most out of their contributions if they understand how the deduction process works and how to choose the right charity.
Just ask the National Kidney Foundation (NKF), which has been running the oldest vehicle donation program in the nation since 1983. Over the last 25 years, Kidney Cars has received more than 650,000 used cars that have provided $150 million in funding for research grants, free health screenings for at-risk individuals, patient services and education. While donors put the brakes on their contributions to Kidney Cars in 2006 right after the law changed, they jump-started the program in 2007 and it’s been picking up speed ever since.
Here is a guide to the new tax law and choosing the right charity:
The New Tax Laws for Noncash Donations
Several years ago, the amount of a car donation could be deducted based on a “fair market price” listed in used car publications, such as the Kelley Blue Book. This amount would apply even if the vehicle ended up selling for much less at the charity’s auction.
Since 2005, however, if a car sells for more than $500, then the selling price at the auction would determine the tax deduction amount. If a car sells for less than $500, then the taxpayer would choose the fair market price or the auction price—whichever figure is smaller.
Even though it seems that the new tax law would serve a disadvantage, it proves to be very useful as it simplifies the tax return process in several ways. With the new laws, the taxpayer:
- Does not have to research and estimate the fair market price of the vehicle,
- Does not get into trouble for accidentally overstating the value of the donation, and
- Saves time and risk as the charitable organization does all the work.
Selecting the right charity is the best way to have a satisfying experience when donating. Responsible and credible organizations will make the effort to sell a vehicle for the highest value possible. It is in their best interest to conduct auctions successfully in order to meet their fundraising goals.
And how do you select the right charity? It is a highly personal matter, but donors should pay attention to a couple of factors.
One, the organization should be a certified nonprofit. Some places may accept charitable donations, but not all are necessarily nonprofit by any legal definition. To qualify for a tax-deductible donation, choose an organization that has a 501(c)(3) tax-exempt status granted by the IRS. NKF is a 501(c)(3), so all contributions to Kidney Cars are tax-deductible.
Second, the charity should be fiscally responsible. Some organizations may keep an exorbitant percentage of the auction’s earnings for administrative and marketing costs—sometimes between 50 to 90 percent! NKF, on the other hand, gives over 80 percent of the raised funds directly to its mission, in the form of medical research, education and community services.
The Other Advantages of Charitable Vehicle Donations
In addition to the possible tax deduction, there are other benefits in donating a vehicle. It relieves the financial burden of registration fees, insurance and taxes, is a convenient way to get rid of an unwanted car and is environmentally-friendly. This is especially true when donating to Kidney Cars since NKF offers free pick-up service and drop-off locations in major metropolitan areas across the U.S. and sells all cars at auction or for parts.
For more information about the National Kidney Foundation’s Kidney Cars, visit www.kidneycars.org or call 1-800-488-CARS.