With Car Charities, Kick the Tires

The IRS warned Monday that people looking to donate cars to charity and take a tax deduction should ensure that the organization is legitimate and keeps proper records.

December usually signals an increase in charitable giving, in part because of the holiday season but also because it marks the last few weeks that a taxpayer who itemizes can do things to maximize deductions for the year.

Donations of used cars have risen steadily in popularity and charities have rushed to embrace them. But IRS Commissioner Charles Rossotti and state officials say contributors must take care to ensure that their vehicles actually are going to worthy causes.

“Don’t get taken for a ride,” Rossotti said.

A tax deduction is not allowed unless the donation is made to a bona fide tax-exempt organization. One way to check is by looking at IRS Publication 78, which is available on the agency’s Web site (https://www.irs.gov); it contains an annual list of charities eligible to receive tax-deductible contributions.

Some charities hire solicitors to seek donated vehicles. Officials say some taxpayers question what happens to the money when the vehicles are resold.

“Any reputable charity should be happy to provide potential donors with financial reports and other information about its activities,” said Karin Kunstler Goldman, assistant New York attorney general and president of the National Assn. of State Charity Officials.

The IRS and state charity officials also recommend that:

* Deductions for car donations reflect “fair market value,” which essentially is what a willing buyer and seller would agree the car is worth. Not every car is worth the full value listed in the vehicle Blue Book because of age, condition, mileage and other factors. IRS Publications 526 and 561 can help taxpayers determine value.

* Keep detailed records, including receipts, and file any necessary IRS forms. Again, IRS Publication 526 has the details.

* Check state laws for how to handle the transfer of the car’s title and license plates.

* Taxpayers itemize where possible to take advantage of charitable deductions. Most people itemize only if it increases their total deductions above the standard deduction of $4,550 for single people and $7,600 for married people filing jointly.