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 How the Ultimate Use of a Charitable Organization's Car Donation Program Affects Your Tax Deduction

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Prior to 2005, the ultimate use of a charitable organization's car donation program had very little to do with how much you could expect to receive as a tax deduction. In fact, many for-profit organizations used the lure of deep (and often totally out of line) deductions to lure donors into supporting a charitable organization.

Car donation proved very lucrative as a type of revenue for many third-party agencies that facilitated vehicular donations for various charitable organizations. Car donation today still represents a good deal for both the charity or non-profit organization (NPO). By dealing directly with charities that have an actual use for what you're offering in the form of actual transportation.

On the other hand, many charitable organizations for car donation that specialize in such gifts, have traditionally used wholesale sales yards and demolition services to get rid of cars as quickly as possible. This is especially true of automobiles that require some work to get them in top running (and selling) condition. In this case, you are only able to claim the sale amount, no matter how low, as your itemized deduction.

Just like a house, the more work you put into upkeep, the higher the inherent value when it comes time to sell. You not only get to enjoy the benefits of the work as well as the often time surprisingly high sale value that even a small improvement job can guarantee. It is the same when giving to a charitable organization. Car donations, when properly repaired and cared for, can give an auto a new lease on life that may last for years.

Of course, as far as the needy populations of a community are concerned in this day and age, the better mileage the car gets, the more likely it is to be useful to those who need donated cars to commute to work from a fair distance. Those who are needing transport for children over relatively short distances will appreciate vehicles with extra room.

If you want to find out what sort of vehicles are in demand in your community, there's no substitute for directly contacting the charitable organization in question. Car donations of running automobiles, suited to your local population, are the most likely to be used rather than sold for the cash.

Even cars that are fixed up to be sold may wind up being sold at auctions that undermine the sale value of your car. While you can make a case for why you should be granted extra deduction monies that more closely reflect the fair market value of the vehicle, it may behoove you to take the lower deduction amount to avoid an unpleasant audit that could result in loosing your deduction entirely. Sometimes it's best to err on the side of caution.

Of course, your tax preparation professional will be able to advise you regarding such finer points of tax strategy. Generally speaking, however, cars that are repaired for auction are sold to the highest rather than lowest bidder. You have every right to inquire after he proposed use of any car you plan on giving to a charitable organization. Car donation is now so dependent upon the ultimate use of that car, that even if you don't care how the charity in question uses your gift, you have to appreciate the benefit of how a efficient use of an old car can result in the highest possible deduction benefit to you as a donor.

You may want to seriously consider narrowing your search to locally run charitable organizations. Car donation to such charities and NPOs that have a mission involving automobiles has a better tendency to deliver the maximum possible deduction allowed under law.

Often this means that your car not be too far gone or require very expensive parts to make it run reliably or have any major conditions that prevent it from being registered in your state. However, if your automobile meets the criteria of your local charitable organization, car donation may be an excellent option, no matter what tax bracket you occupy.