Car Donation, Full Value Approach Question

[savory]

Hi,

I plan on buying a new car and want to donate my existing 2009 car. *My question centers around tax deduction and to learn if anyone has donated a car per the example below.* This will be my only time donating a car.**

My goal is to provide a car to a person who needs one and claim a full value tax deduction. *The process as I understand it would be to donate to a non-profit (I am not sure if religious institutions would qualify) and have them give the car to the person who needs one.* *If that process is followed, meaning the*NGO receives no value, I* would be able to deduct the accepted estimated value of the car.**

I understand that the NGO would not directly benefit but my goal of making a charitable donation (vs a trade-in) will be accomplished.* And my plan is that this* year as DW turns 70.5 years, we will open a charitable giving account which will allow us to create a significant dollar donation for*tax season.**

Has anyone donated a car like* this* or something similar? *If so, how did you approach it? *Any other thoughts/clarification?

Thanks!

 

[SecondCor521]

I haven't, but lots of people have and do each year.

It used to be that people would give a car to charity and they'd write off an inflated value on their Schedule A. So many people abused the tax law in this way that the new way to do it is for you to donate it to the charity, then they sell it, and then they tell you what they sold it for, and you can deduct whatever they sold it for. I think that is the current rule, but you could read the instructions for Schedule A when they talk about charitable donations.

Any 501(c)(3) charity that accepts cars should work just fine. Not all 501(c)(3) charities accept cars. Not all organizations that accept cars are 501(c)(3) charities. Doesn't matter if they're religious or not; some are, some aren't.

You can donate as many cars as you happen to own AFAIK. There is no "one donation per year" limitation or anything, although you are only permitted to deduct a certain percentage of your AGI in charitable deductions each year. Although most people can't/don't itemize anyway. In your case since you're MFJ and (probably) both over 65, your standard deduction is about $27,000. Anyway, the point is to be aware of your AGI and your itemized deductions situation. Depending on your AGI and the value of the car, you may not benefit tax wise at all.

I suppose it depends on your motivation - if you just want to help someone out and be a nice person, then great. But if you're hoping for a tax benefit, it may or may not be there.

Oh, that's another thing. You can't tell the charity - "Hey, give my old car to Bob." They have to be able to give it to whomever *they* choose; otherwise it's not really considered a charitable gift.

HTH.

 

[SecondCor521]

Oh, and as far as the charitable giving account...

Yes, you can do that.

If you're doing it from your wife's RMD to a DAF (donor advised fund) as a QCD (qualified charitable deduction), apparently that's not allowed. You can go from her RMD to a charity, though.

And you mentioned 70.5. Depending on exactly when your wife was born, she may not be required to start her RMD until she is 72. Check the rules. Even so, she can start doing QCDs at age 70.5 even if she is not required to start RMDs.

 

[JoeWras]

You need to find the right charity, one that specializes in placing cars.

In our area, we've used Wheels4Hope. They try to place most cars and hence you get FMV. Cars that are bad off will go wholesale, but every attempt is made to avoid that.

https://wheels4hope.org/tax-benefits/

At Wheels4Hope many of the vehicles donated to us are good condition and are repaired and placed as program cars - this is our mission! When this happens, the donor is able to claim a tax deduction equal to the fair market value of the car. This can mean a deduction worth hundreds or even thousands more than if you were to donate your vehicle to another program. Cars that are in good condition, but not used as program cars, are repaired and sold in a retail setting - also bringing fair market value to the donor as a tax deduction.

 

[Souschef]

Oh, and as far as the charitable giving account...

Yes, you can do that.

If you're doing it from your wife's RMD to a DAF (donor advised fund) as a QCD (qualified charitable deduction), apparently that's not allowed. You can go from her RMD to a charity, though.

And you mentioned 70.5. Depending on exactly when your wife was born, she may not be required to start her RMD until she is 72. Check the rules. Even so, she can start doing QCDs at age 70.5 even if she is not required to start RMDs.

If she does that, it will also lower the balance of her IRA when she does have to take her RMA

 

[disneysteve]

Not specifically car-related, but for 2021, even if you take the standard deduction, you can take a separate $300 per spouse charity donation for a total of $600. You don't have to itemize deductions to do that. So the value of the car could go towards that.

 

[CaliKid]

What does the charity gave out of this?

 

[pb4uski]

I did this many years ago and it didn't end as well as expected. We were trading in my son's beater for another car and the dealer would only give me $500 for it. The trade-in value was allegedly $2,000, so I gave it away to a 501(c)(3) expecting a $2,000 deduction... but the documentation that they sent to me was only for $500 given the amount of repairs it needed so I only got a deduction for $500 and a ~$150 tax benefit. I would have been better off accepting the $500 trade in value from the dealer. Lesson learned.

It was one of those things that we had to make a quick decision on an ended up making a bad decision.

We no longer itemize and give plenty to fill up the $600 deduction, so it wouldn't benefit me at all.

 

[SecondCor521]

Not specifically car-related, but for 2021, even if you take the standard deduction, you can take a separate $300 per spouse charity donation for a total of $600. You don't have to itemize deductions to do that. So the value of the car could go towards that.

Nope. The special $300/$600 deduction is only for gifts of cash/check. In kind donations are not included.

 

[Montecfo]

FYI the $300 above the line contribution is for cash only, not in kind.

On the car, I think a lot of those places just sell for scrap.

 

[savory]

What does the charity gave out of this?

If it is a charity that needs a car, they get a car that perhaps staff could use at a lower cost.

Or, in our town, we have a neighborhood NGO that works with low income people in the neighborhood. They might have a client that simply needs a car. It would be a service to their client helping the NGO to deliver their mission.

 

[savory]

I did this many years ago and it didn't end as well as expected. We were trading in my son's beater for another car and the dealer would only give me $500 for it. The trade-in value was allegedly $2,000, so I gave it away to a 501(c)(3) expecting a $2,000 deduction... but the documentation that they sent to me was only for $500 given the amount of repairs it needed so I only got a deduction for $500 and a ~$150 tax benefit. I would have been better off accepting the $500 trade in value from the dealer. Lesson learned.

It was one of those things that we had to make a quick decision on an ended up making a bad decision.

We no longer itemize and give plenty to fill up the $600 deduction, so it wouldn't benefit me at all.

The goal is to have the NGO use the car or provide it to a client. Not sell it. I did not know about wheels4hope (joeWras post) that has created an NGO to meet the needs of the donor and their clients. I am now looking for something like that near me. I am sure I would of had your experience without this post. One of the reasons I find this forum so valuable.

 

[JoeWras]

The goal is to have the NGO use the car or provide it to a client. Not sell it. I did not know about wheels4hope (joeWras post) that has created an NGO to meet the needs of the donor and their clients. I am now looking for something like that near me. I am sure I would of had your experience without this post. One of the reasons I find this forum so valuable.

These kinds of car placement charities are not plentiful. Most of the ads you hear on TV or radio are for charities that just want the cash value to do something else (help kids, fight kidney disease, etc.) These are worthy causes, but the charity just wants the cash for their primary mission so they will likely sell the car to a broker at a very low fee. And the new tax law states that's what you can deduct. pb4uski's story is typical of that.

Wheels4Hope takes a different view. They place cars to worthy recipients. They don't advertise, so few people know about them. They are local to my region. They are grassroots. And they know the tax law. They also work with other charities like Habitat for Humanity or the local transition housing charity. People who move into a new home frequently need transportation.

Hopefully OP can find something similar in their region.

 

[disneysteve]

Nope. The special $300/$600 deduction is only for gifts of cash/check. In kind donations are not included.

Thank you for the correction.


Is there any way to edit my original reply? I don't want to be spreading misinformation.

 

[JoeWras]

Thank you for the correction.


Is there any way to edit my original reply? I don't want to be spreading misinformation.

After a while, edit times out. Then you have to get the mods to do it.

Someone can correct me if there is a better way, but one way that I know works is to go to your post and hit the "report !" button. This sends a notification to the mod team. Instead of reporting yourself for being political or something, just mention you need an edit to fix the misinformation. I don't think it counts against you.

Maybe I'll find myself editing this post if there is a better way to notify the moderators.

 

[savory]

I posted on one of our community FB pages and received 2 suggestions so far. One is a veterans group that accepted a car donation 2 years ago and the poster claimed the cars full value. The other a homeless shelter appears to simply be a suggestion but I will check them out to see if they have a program. I


I will keep you informed of process/outcome.

 

[CaliKid]

If it is a charity that needs a car, they get a car that perhaps staff could use at a lower cost.

Or, in our town, we have a neighborhood NGO that works with low income people in the neighborhood. They might have a client that simply needs a car. It would be a service to their client helping the NGO to deliver their mission.

I must have mis-read your initial post. I thought you were trying to give to the charity and then have them give it to someone you chose. I must be seeing things.

 

[savory]

I must have mis-read your initial post. I thought you were trying to give to the charity and then have them give it to someone you chose. I must be seeing things.

It was a bit confusing given the first part of the post. This should be the worst thing that happens to me all day

 

[OldShooter]

I had a car with a obscure and intermittent engine problem where I didn't want the buyer to know where I lived. In our city there is an organization that uses donated cars to train mechanics, so I gave it to them. They do any necessary repairs and sell the cars to needy people. I don't remember all the details but they gave me the paperwork and certs necessary to support deduction of the book value of the car.

@savory, as was suggested, your best bet is to select a charity based on your desires for the car. Any of these charities are subject matter experts in the rules and can optimize your deal to suit. SGOTI is just not a good source for this kind of thing.

 

[Stormy Kromer]

I gave a 13 year old Buick to a 501 charity that specialized in providing cars to people in short term need of transportation. They also gave cars to worthy recipients.


It worked great for everyone involved. The organization test drove the car before they accepted it, then gave me a receipt for whatever value they assigned to it. I was itemizing at the time so I could use the amount they placed on it as a charitable deduction. They turned around and gave it to a single mom with two kids. Everybody won.

 

[JoeWras]

In case you haven't read it, this IRS publication has a lot of good information on this subject, including choosing the charity, what is the charity's responsibility, and what is your responsibility.

It is in the new IRS publication format and is actually a little more readable than the old eye tests on scrap newsprint.

https://www.irs.gov/pub/irs-pdf/p4303.pdf

 

[qwerty3656]

We donated to Charity Motors a couple times. They take your car and sell it to a low-income family at a reduced rate and then give the proceeds to a charity of your choice.

You get to deduct the full blue-book value. Although with the larger standard deduction these days, what you get to claim has been less important recently (at least for us).