Watch Out For the Car Donation Swindle

There is a swindle in the air, when there is a deal being made on the side. Even if your intentions are good, you need to look out for scams which might land you in a lot of trouble. One such scam which has been going around has been the car donation one. Even after the Internal Revenue Service (IRS) has toughened its regulations concerning people donating their old vehicles to charity, you have to be careful.

The most common of these scams are when people donating vehicles apply for a tax deduction which is more than the sale value of the car. There are also persons and companies masquerading as charitable organizations to make a quick buck out of these donations. The IRS regulations have made it more difficult for these crooks to work the system. But donors have to go the extra mile to ensure that their car donation is to a legitimate charity. Remember, the onus on proving that your car donation is above board is on you, as the donor.

There are free guides in certain websites where you can check on charitable organizations and the car donations they run. You will have to find out if this charity is really a not-for-profit organization, i.e. the resources that the charity generates from donations are used only for those in need. This is important, as only a donation to an organization which is legitimate will get you the tax deduction.

You need to do your research thoroughly before you donate your vehicle. You have to do background checks on the organization. Ask the persons concerned how they plan to use the vehicle. Will it be used by the charity in its programs or will it be sold. In case of the latter option, you will have to ask how much the charity will get out the sale proceeds, especially if the sale is handled by an intermediary.

However, if you feel that your donation should be used in a specific way, you have to make this clear. If you want the car donation to go towards transportation of people in need and if the organization is not conducive to this suggestion, look for another one. Again, if the vehicle is sold; ask what the sale proceeds will be used for.

You can claim tax deductions only on the price amount the charity has resold it for, if it the donated car has a market value of over $500. If the value of the car is $500 or lower, your claim for tax deduction should be based on the general condition of the car, the amount of mileage it has done and a reasonable market price that it could fetch. Check out the pricing guide for used cars and you can get a fair idea.

Your duty does not end with the car donation. You will also be required to keep the records of the transfer to the charitable organization. After the car is re-titled, you will have to report the change in ownership to the DMV (Department of Motor Vehicles). This is essential or else you will end up paying someone else’s parking fines.