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Tax advantages of donating a car

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How to donate your car and get a tax deduction

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.

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