Finance

Prior to the tax changes of 2005, the average type of person in the United States who was prepared to donate a car to charity included anyone and everyone. However, since the 2005 tax deduction changes, it tends to be the upper middle class who are willing to donate their car.

There would appear to be several different reasons for this.

To start with, the self employed are more likely to take itemized deductions. They also must pay their own contributions, plus those that you would normally expect to be paid by an employer.

This double form of taxation leads to the self employed being always on the lookout for extra deductions opportunities. Donating a car to charity fits this bill nicely, as it means that up to several thousand dollars can be gained in deductions.

There will always be an element of the poorer section of the community that will still donate their cars even though they are unaffected by any possible tax deductions. These are the people who are only interested in the free towing that is offered by the third party agents for charities.

Another element of car donation that makes it attractive to the better off person, is a desire to be of assistance to a local charity who will take your car and use it for two or three years rather than just sell it for the wholesale value. This not only gives the donor a higher deduction value, but also the satisfaction of knowing that they have helped local people more needy than themselves.

Here we see how the demographic has changed since the change in tax laws. Although middle class people may donate a car that doesn’t run very well, and is therefore liable to be sold off at its wholesale value, the better off can afford to donate better cars, thereby reaping the rewards of the higher deductions that are available.

This means that the type of car that is typically donated since the 2005 tax changes may not be very lucrative for the charity, unless it is running well and worth their while to fix up and use.

You can discover a lot more about how to donate a car to charity, and the associate tax benefits, at our website at http://www.CarDonation4Charity.com.

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To counteract a misunderstanding over the definition of "fair market value" when claiming a tax deduction for donating a vehicle to charity, the IRS made some changes to the legislation in 2005.

It is no longer satisfactory to use the Kelley Blue Book value, as many donated vehicles fall below even the "poor" category in that publication. The value must now reflect the condition of the donated vehicle and also reflect the price that the car would fetch if advertised on the open market.

The extent of your claim for deduction can be largely affected by the use that the vehicle is put to by the charity. If it is sold, then your claim must not exceed the sale price achieved by the charity, despite what you may feel is the actual "worth" of the vehicle.

However, if the vehicle is used by a needy person, then the full "fair market value" can be claimed as if you had sold the vehicle yourself on the open market. However, you need to bear in mind that many low value cars fetch less than their owners think they should.

There are other aspects to be taken into consideration, and you can discover a lot more information concerning fair market value and the whole subject of car donations to charity at http://cardonation4charity.com.

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