A recent federal study indicates that in many instances such vehicle contributions may help the intended charities far less than taxpayers think. In addition, a California study revealed that 80 percent of charities contracting with fundraisers to run their car donation program received less than 60 cents for every dollar value of vehicle donated. In one donation reviewed by the General Accounting Office (GAO), a taxpayer donated a 1983 truck valued at $2,400, but after the fundraiser sold the vehicle at auction and deducted administrative and advertising costs, the charity received $31.50.

 

The IRS advises that taxpayers contemplating such donations should ask many questions and carefully consider just how much of the proceeds from the car will go to their intended charity.

 

"We encourage people to proceed carefully when donating vehicles," said IRS Commissioner Mark W. Everson. "Supporting charitable activities through tax deductible contributions is an important element of tax law and serves the national interest. But people should know that in some cases the donation is providing little value."

 

Across the nation, an increasing number of charities have turned to car-donation programs in recent years as an effective way to raise money.  And these programs, if well managed by the charity, can offer significant benefits for the exempt organization and the taxpayer.

 

In addition, IRS officials are concerned that, as the end of the tax year approaches and taxpayers finalize their charitable donations, many may not know enough about IRS recordkeeping and filing requirements.

Of 129 million individual returns filed for tax year 2000, the GAO estimates 733,000 returns had a tax deduction for a vehicle donation. These donations were valued at about $2.5 billion, reducing taxpayer liability by an estimated $654 million.

For a taxpayer, the appeal of a car donation is simple:  Unload an old car, help a worthy cause and take advantage of tax provisions designed to support the generosity of Americans. Taxpayers who itemize deductions on their tax return can deduct no more than the fair market value of their contributions to qualified charities.

 

The proliferation of car donation programs, however, has taken place without taxpayers always understanding what they must do to take advantage of the deduction.

 

"A few simple steps can help avoid headaches for taxpayers," Everson said.

IRS officials recommend that people who want to donate their vehicle take the following steps: