Selling a used car can be a hassle, whether it involves inviting strangers to your house or arguing with a dealer over the price.
Donating a vehicle to charity can be a painless alternative that benefits the recipient and the donor, who may be able to claim a deduction on their federal income tax return.
Though most charitable organizations will accept a donated vehicle, some politely decline offers of “beaters” that aren’t running or are of value only to junkyards.
Virtually all organizations that accept vehicles leave it up to the donor to determine how much it is worth because they don’t want to get caught in the middle if the Internal Revenue Service challenges a tax deduction.
Many think their vehicle is worth more than it is, and trading in or trying to sell a car can be a rude awakening when they see how little others will pay.
The IRS may be stingier than used-car appraisers.
Tax deductions are based on “fair-market value,” which the IRS defines as “the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.”
In other words, a vehicle is worth what you would get from a neighbor who doesn’t need another car and knows you changed the oil once every two years.
The IRS doesn’t accept as gospel values from used-car guides such as the Kelley Blue Book or National Automobile Dealers Association Official Used Car Guide.
“The prices are not `official,’ and these publications are not considered an appraisal of any specific donated property,” the IRS warns in Publication 526 on charitable contributions. “But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area.”
So, beyond those “clues,” how does a law-abiding taxpayer determine the value of a vehicle?
The IRS suggests using “comparable values” published in newspaper advertisements and posted at used-car lots, but a spokeswoman (who asked to be unidentified in keeping with IRS policy) warns that those are asking prices, not selling prices.
“Take a good look at your car and figure out what you could sell it for,” she said, bearing in mind that mileage, appearance and mechanical condition affect the value. “It’s a case-by-case decision, and there is no absolute answer.”
There is an after-the-fact reality check that can tell donors if they were way off on market value. If a charity sells a donated vehicle within two years, it must report the sale price to the IRS and the donor. The donor can file an amended return to adjust the claimed deduction.
Besides setting the market value, donors have other hurdles to clear, including whether the organization receiving the vehicle qualifies for tax-deductible contributions. The IRS says charitable, religious, education and scientific organizations, government agencies and nonprofit hospitals are among those that qualify. Such organizations should be able to verify their status.
Among those that don’t qualify are labor unions, political organizations and groups that lobby for law changes.
The IRS lists most eligible organizations in Publication 78, which is available at public libraries and from the IRS (800-829-1040 and www.irs.gov).
To take a deduction, the donor has to itemize deductions, and the IRS says less than one-third of taxpayers do.
As with other itemized deductions, it does not reduce taxes dollar-for-dollar but depends on which tax bracket the taxpayer is in. For someone in the 28 percent bracket, the tax reduction is 28 cents for each dollar of market value ($280 for a vehicle valued at $1,000).
If a claimed deduction is larger than $5,000, then the IRS requires an appraisal by “a qualified appraiser.” The donor has to file Form 8283 with the tax return, and the appraiser and recipient have to sign the form.
What happens to vehicles after they are donated depends on the recipient and the vehicle’s condition.
Schools that have training programs for automotive technicians may keep donated vehicles to use in their auto shops.
Kenneth Shinsako, chairman of automotive technology at Oakton Community College in Des Plaines, relies on individuals and automakers to donate cars for students to work on. Oakton students don’t practice on the vehicles of the public or college staff for safety and liability purposes.
Shinsako says Oakton receives five to 10 vehicles per year, though the number varies between “feast or famine.” The college does not accept vehicles that aren’t running, and it prefers models newer than 10 years old so the technology isn’t out of date. Oakton does not provide value estimates.
“It’s up to the donor to determine the fair market value,” Shinsako said, suggesting that donors consult their insurance company, lenders and newspaper advertisements for help in determining value.
The Illinois chapter of the American Lung Association, which advertises for donations, sells vehicles in marketable condition through used-car auctions and sells the “beaters” to salvage companies. The group has a Web site dedicated to guiding donors through the process (www.giveacar.org) and a toll-free number for information (800-583-4425).
The lung association gives donors an estimate of their vehicle’s value from the N.A.D.A. Official Used Car Guide, and its Web site links to the NADA and Kelley Blue Book.
“That’s only a starting point,” spokesman Alan Klinc warns. “We always suggest that donors seek the advice of their tax advisers.
“A 1995 Chevy Malibu in fantastic condition is worth a certain amount. If it needs repair or has high mileage, you have to take that into consideration.”
The lung association, which sends a tow truck to pick up vehicles, issues receipts acknowledging donations but does not list a cash value.
Rawhide Boys Ranch, which houses 60 boys referred by juvenile courts at a facility in New London, Wis., received 158 donated vehicles last year from the Chicago area with the help of the new-car dealers.
About 20 dealers that belong to the Chicago Automobile Trade Association accept donated vehicles on behalf of Rawhide, which is about 30 miles west of Green Bay and sends transporters to the Chicago area to pick them up.
Donors make arrangements through Rawhide (www.rawhide.org or 800-729-4433) and then take the vehicle to one of the participating dealers, which are listed on the Web site. Timothy Costello, marketing and public affairs director for the organization, says about 60 percent of the donated vehicles go to used-car auctions.
The rest are taken to the Rawhide facility, where they are given light repairs by the boys, age 10 to 18. Some vehicles are then auctioned to wholesalers, others are kept for job-training programs, and a few are put into service by Rawhide.
Though some donors see charities as a convenient way to get rid of a beater–and get a tax deduction instead of paying a junkyard to haul it away–Costello says Rawhide doesn’t accept all offers.
“Our emphasis is on doing things that benefit the boys,” Costello said, and some vehicles have little or no value. “It all depends on the car. It could be a collector car, but there also could be a tree growing through it.”
Cutlass went from gift to movie star
Donating a car to charity can do more than generate a tax deduction; it might also land a supporting role in a movie–for the vehicle, not the donor.
That is the case with a 1980 Oldsmobile Cutlass severely damaged in transit before it reached a dealership.
The Cutlass was riding on the upper level of a car transporter when the driver misjudged the height of a viaduct, recalls Kenneth Shinsako, chairman of the automotive technology program at Oakton Community College in Des Plaines. The viaduct ripped most of the roof off the car, and General Motors donated it to the college for use in the auto shop.
Though the damaged car never made it onto public roads, it enjoyed a Hollywood ending by appearing as a prop in the 1984 movie “Sixteen Candles.” Part of the movie was shot at Niles East High School in Skokie, where Oakton had its auto shop at the time.
Oakton still uses the topless Olds in its auto classes in Des Plaines.
— Rick Popely
Where to donate
Here is a sampling of the charities that accept automotive donations. Most have requirements, including basic maintenance standards, for the cars they will accept; call for specific instructions. Local schools or non-profit organizations are also likely places to accept donated cars.
– American Heart Association 888-242-2271
– American Lung Association 800-583-4425 or www.giveacar.org
– Big Brothers Big Sisters of America 800-710-9145
– Catholic Charities, 888-227-4827 or www.caritasforchildren.org
– Lambs Farm, 877-711-5262
– Make-A-Wish Foundation 888-969-9474, www.wishes.org (click on “giving,” then “donations options page,” then “car donation”)
– Multiple Sclerosis Association of America 877-467-2227
– National Kidney Foundation 800-488-CARS (2277)
– Oakton Community College 847-635-1906
– Rawhide Boys Ranch 800-729-4433 or www.rawhide.org/vehicle
– Salvation Army 877-723-2886
– Society of St. Vincent DePaul 773-378-8022
