Don't Give Away Your Old Car to a Charity

Gary North - March 06, 2017

This was posted on Friday. It was posted in response to a question from another site member.

The site member wanted to know if anybody knew of a good charity that accepts old cars as donations, and for which he could get a tax deduction.

The very fact that he had to ask indicates the fact that not many charities are set up to offer receipts for donations of old cars. This restricts the number of charities to which the site member can donate something of value.

Crunch the numbers on donating to a charity at what deduction, vs. selling it and taking the money to put toward a much better charity. The charity racket especially with donations is not very efficient in how the goods are used.

This is excellent advice. I want to go through the reasons why it is excellent advice, which will help you to apply the general principles in other areas of charitable giving.

If you are holding an auction, you want a lot of people to show up. The more people who show up, the more likely that there will be a bidding war for whatever it is you're trying to sell.

When you give away a car to a specific charity, you are holding an auction in which only one person shows up. You are going to get a low bid.

You are going to have to find out what this particular car is worth, and you had better get a letter from the charity that confirms your estimate. Otherwise, you are at risk that the IRS does not accept the evaluation that you placed on the car. I realize that there are not many IRS audits, but you don't want to go through one in which there is a challenge.

You have no idea how much money the charity is going to get from the sale of your car. If the charity has a regular program of accepting cars as donations, whoever is running the car operation is going to maximize whatever the charity receives. The charity will probably get more money for it than you have been allowed to deduct on your gross income for income tax purposes. In other words, whoever is running the charity's car donation program has better information than you have regarding the market value of the car. Obviously, this person does not want an IRS audit on discrepancies that favor donors. If you think that you are worried about an IRS audit, think about the people who are running a charity from which they receive salaries, and on which their careers depend. They are going to be better informed about the price of cars than you are. They are not going to give you the benefit of the doubt. They're going to give their IRS-approved charity the benefit of the doubt.

If you run an ad in Craigslist, and if you include some photos and positive descriptions of the car you want sell, you will probably get a buyer. You are now in a position to make a donation to any charity, and the IRS is not going to challenge the donation. The charity will issue you a receipt, and if you're wise, you will make a photocopy and include it in your IRS return. When the IRS auditor sees that you are able to support every donation with either a photocopy of a check or some other official receipt, he is going to be less likely to audit you. He knows that you can verify the fact that you made a donation.

The other advantage was mentioned by the person who posted the advice. You can give the money to a better charity.

You can also give the money to multiple charities.

You don't have to go shopping around for a specific charity that has a car donation program. Every charity will accept a check. Hardly any charity will accept a donated car. It is too much trouble to convert the car into money. The directors would rather have a check.

If you have high income, and if the value of your time is therefore high, you may not want to get involved in selling a car. But most people should get involved, because it will help them to create better ads. Craigslist is a tremendous way to get rid of stuff you don't want, and at the same time, it gives you an opportunity to learn how to write an effective advertisement. I think more people should develop this skill. Craigslist is a great way to develop it.

So, my general advice is this: sell the old car, and donate the money to exactly the charity that you would like to receive your money. It makes more sense economically. It is certainly better for the charity. And you are less likely to get audited by the IRS.