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Tax advantages of donating a car

Dosye Vyol: Yon pakèt Nèg nan Jacmel antre nan Kay moun Volè timoun Vann yo epi Vyole yo.

You may not be surprised that some scammers are prepared to siphon off money from charitable car donations. But you might be shocked that there seems to be a small industry dedicated to doing just that.

These unscrupulous operators leave the charity — and more importantly its needy beneficiaries — worse off. But they can also act against your interests by reducing or eliminating the tax deduction to which you’re due.

This article arms you with the information you need to avoid these scams. To protect yourself and those who need your generosity, read on.

Why donate your old vehicle?

In addition to the satisfaction you get from making a charitable donation and helping those in need, there are usually two reasons why you might want to give your old car or truck away:

  • It isn’t (or is hardly) running, and you just want to get rid of it. A charity might come and tow it away for you.
  • You want to avoid the hassle of selling it, and your resulting tax deduction takes some of the sting out of not getting its full market value.

Why do scammers scam?

Obviously, scammers are in it for the money. But how do they benefit?

Well, there are a number of ways. They can, for instance:

  • Be intermediaries (middlemen or middlewomen) who deduct outrageously high expenses and pass on only a tiny percentage of the vehicle’s value to legitimate charities
  • More rarely, be a fake charity, and keep all the proceeds for themselves
  • Be fronts for car auction houses, whose primary goal is to increase their fees, commissions, turnovers and profits

It’s worth remembering that people bidding at a car auction know they are going to have to normally pay commission on top of the bid price. So they bid lower, with the total they are going to have to pay in mind.

That means an auction house may truthfully report the winning bid without that reflecting the money it’s taken out of the deal, because the buyer would have paid more if commission wasn’t going to be levied. In addition, the seller pays commission, too.

How do you spot a car donation scam?

Often, the first sign someone’s trying to scam you is that the person approaches you — rather than the other way around. This isn’t a surefire indicator, because some legitimate charities might scan local papers and websites for small ads for low-value car sales and then contact the seller. But it should raise a red flag.

Alex Brodrick, President and CEO of Volunteers of America Michigan, suggests:

  • If someone asks you to donate your vehicle, ask that person if he or she works directly for the charity being represented. Questionable vehicle donation programs often accept donations on behalf of other groups and pass along only a small fraction of the proceeds.
  • Beware if a vehicle donation program is vague about the programs it supports, or where the programs are offered.
  • Before you donate, ask what percentage of your donation goes to helping people. At Volunteers of America, for instance, an average of 88 percent of donations go directly to locally run programs, such as homeless shelters and support for veterans. There is no middleman.

 

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