OMG! Car Donation Tax Deduction Scam!

OMG! Car Donation Tax Deduction Scam!

OMG! Car Donation Tax Deduction Scam!
OMG! Car Donation Tax Deduction Scam!

Also, how can you avoid being stung by a scam if you choose to donate your car to charity?


Car donation is a common practice in the United States, but sadly many people fall victim to a frightening charity scam. Thousands of people decide to donate their vehicles to charity every year. But what exactly is car donation?

It makes sense to get rid of your vehicle once it has outlived its utility. One thing you could do is sell it to the local scrap dealer. However, another option is to give it to charity.

Charities and NGO’s are facing a cash crunch these days. One creative way in which they can receive donations is by accepting used cars. Once you donate a car, the NGO’s and charities hold auctions and used car sales. Here, they liquidate these assets. They may then use this money for their internal activities.

People choose to donate cars to charities, not just to provide aid in kind, but to also benefit from the various tax deductions that they become eligible for, post-donation.


What is the procedure for donating cars?

The DMV specifies a fulfillment of certain pre-requisites before the public can donate used vehicles. As per the rules, car donation must follow similar protocols as when selling your car.

Vehicle owners must have the relevant documents such as the title of ownership, license, and certificate of registration. You also need to have a copy of the vehicle history report, reports of any tests that you had done on your vehicle and the bill of sale.

The second thing you need to do is select a charity or an NGO of your choice. Contact your chosen charity and confirm whether they accept donations in the form of used cars. Not all charities do. It’s best to have a few alternatives ready in case the charity of your choice does not accept car donations.


Applying for tax deductions

Car donations have come under the radar for the amount of tax deductions they offer. Many critics believe that donors indulge in this type of philanthropy, to seek tax shelter. Irrespective of whether this is true or not, what is true is that donating cars can indeed help you with tax savings.

While applying for deductions, it is important to have a written acknowledgment from the charity of the donation you have made. There are certain stipulations regarding how many deductions you can actually claim.

As per the law, you can only claim the gross returns that the charity made during the auction of the car. You cannot claim the value of the car at the time of donation. Additionally, you can’t claim the cost of repairs and maintenance.


Scams during car donations

Charities accept car donations in two ways. One is a direct donation to the charity in question and the second is through a third party, who acts as a middleman.


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