How to Determine the Fair Market Value of a Car Boat or RV Donated to Charity

Even though the laws were changed in 2005 to reduce the incidence of perfectly legal “tax fraud,” there are still some situations where you may claim the “fair market value” of your car, truck, boat, RV or trailer when you donate to a legitimate charitable non-profit organization (NPO). However, the rules governing what is “fair market value” have also changed.

Until it was clarified, many people (and paid tax professionals) thought this meant taking the “fair” amount from the Kelley Blue Book (or a similar estimation service), regardless of the actual condition of the vehicle. The IRS had different ideas about just what that was when they wrote the statute, but the wording was less than clear. The fair market value clause cost the IRS an estimated $640 million in 2000.
Learn more @ yourcardonation.com

Also, consider what shape the vehicles donated by middle-class Americans are actually in when their owners finally consider donation. Such vehicles are very often in less than “poor” shape. Many third-party, for-profit companies that acted as agents for charities were taking cars whether they ran or not (and advertising as such). The owner got to avoid a fee at the scrap yard, let someone else pick the car up for free and claim the fair market value as a tax deduction.

However, taking the actual fair market value of your vehicle is where the IRS noted the discrepancy. Not only were the agents skimming as much as 70% of the sale price of each vehicle right off the top in legitimate (though sometimes dramatically padded) “service fees,” but the difference in real worth became apparent at the point of sale. Since most of those cars ended up on the wholesale market, the price difference was even more acute.

Even the “poor” rating in the Blue Book requires a running car. Clearly there was a big difference between what these cars would fetch if someone put an ad in the paper and their fair market value, as someone who'd taken economics classes would understand the term. The laws were changed in 2005 to require a receipt of any gift valued over $250 as well as a written satement of what the car actually sold for (over $500) or what use it was put to. Therefore, if the car is sold as its first use after donation, you will only be able to claim the amount of the sale price that was actually given to the charity.

However, if the vehicle is used, as is, you may deduct the real fair market value – the price you can actually get for the vehicle if you were to go ahead and sell the car yourself. If the car is actually used as a car by a needy individual, your deduction can increase as much as 10-fold versis sold on the wholesale market.

If at any point in the first two years after you donate a car to charity, the car is subsequently sold, the charity will have to send you another receipt (actually a Form 8282) letting you know what happened to the vehicle. You don't have to change anything on your taxes, whether you've filed them yet or not. If it was legitimately used for any length of time, you may claim the fair market value of the car when you donated it.

In fact, to back up your claims and justify the fair market value of your car that you've chosen, it is often a good idea to take pictures of the vehicle, inside and out. If the vehicle is valued at over $5,000 you'll need a independent appraisal (in writing) to confirm your fair market value calculations.

If the car is to be fixed up and sold, you may also claim the actual fair market value of your car, as it was when you owned it, if the vehicle is repaired to such an extent that it may be sold for more. You are still allowed to claim as much as you could have gotten if you'd placed a classified ad.

Though the concept of fair market value does still allow you to claim values that assume perfect selling conditions. However, in the real world, many people price old cars to make them sell quickly, so consider what you could actually get for it if you tried. You can assume a small advertising budget.

Protecting Yourself Against Fraud When Using an Online Car Donation Service

Since just about everything can be done online in some form or another, it's not surprising that you can use online car donation services to get rid of an unwanted car and secure what might be a significant tax deduction. However, it's a good idea to be careful about just what sort of company you let handle this transaction for you.

Even good charities can let bad companies represent them. This is sometimes the result of someone on the side of the charity not looking to closely into the qualifications of those actually doing the tow work and the paper work involved with selling a vehicle and reporting the proceeds accurately to the charity and yourself.
Learn more @ yourcardonation.com

On the other hand, the problem may be that the charity hired a service that facilities pick up and delivery with a network of independent contractors. This does, of course, decrease the amount the charity will receive as a percentage of the car's sale price at wholesale auction. However, it does guarantee that you'll be able to call a single number to initiate a donation no matter where you live through online car donation.

Regardless, you want to make sure there's something to guarantee the online car donation service you choose is at least legitimate. For starters, it should say what the charity is that you're donating to. If this isn't readily apparent, a certain amount of this may be bad web design, though this is a common tactic used by companies that are actually illegal according to Federal law.

It is your duty when using online car donation services to check and see not only that they list a charity, but make it possible for you to check up on the non-profit, exempt status with the IRS. Thankfully, you can look up tax ID numbers from the IRS website. Donations made to less than real non-profit organization (NPOs) are not allowable tax deductions and can even result in an audit.

Once you've verified that the NPO in question is real, you may then donate to your hart's content, though the amount of a deduction eventually garnered for the donation will often be less from an online car donation site than you might get from contacting a local charity that can use the vehicle directly.

Another thing you'll want to keep an eye out for is an online car donation that makes you responsible for any charges. Since you're doing the donation, there's no reason why you should have to deal with any sort of fees or charges. Some unscrupulous companies will present donors with a destination charge, though there's not a reason to pay such a charge either, especially if you find out your car is being sold rather than going out of state.

Online auto donation has certainly come along way since the early days of dial up bulletin boards. The industry got so large in the early 'aughts that the General Accounting Office felt compelled to investigate the practice. Resultant legislation has taken many of the smaller players out of the industry, though it continues to be lucrative enough.

Regardless, they're not going anywhere, anytime soon. A simple search for “online car donation” in your favorite search engine should return about a million pages of donation opportunities and information on services that can help you get rid of your extra vehicle.

It is good to know that if a tax donation isn't very important to you, there are online car donation services that will take care of the hauling away and paperwork associated with the change of ownership as well as the sales and paperwork associated with the actual donation. Even if your car is running, it will be towed from its current location.

You shouldn't assume you'll get a hefty donation from your online car donation. Often times, the sale price at a wholesale auction are so poor that your charity may not benefit very much at all. Be sure that the charity in question isn't responsible if money is lost on the transaction, especially if you're donating a car that's not in very good shape.