Car Donation Scam?
You may recall all the ads on tv and radio prior to the new year pushing people to donate their car to charity and get a tax donation. Prior to 2004, if you donated your car to charity, you were allowed to take a tax deduction of the fair market value of the car. However, there really was no way to confirm the fair market value of the car, so people could get away with just using the "Blue Book" rating system, regardless of what the actual value of the car was.
In 2004, the IRS closed that loophole and said that you could get an automatic fair market value deduction of $500. Now anything over $500 has to be determined 1 of 2 ways. If the charity kept the car, then the fair market value would be determined by the blue book minus any repairs. However, most charities simply sell the donated car and that sales amount is the fair market value. The IRS requires the sale be "arms-length" and in an "open market." Any deductions in excess of $5,000 require an appraisal.
Anyway... several days ago, rather than spend more money keeping my 1997 Toyota Avalon going or trying to sell it, I donated to one of the advertised charities. The "median" blue book value was $5,300. The "low" blue book value was $4,100. I just got the tax receipt in the mail from the charity, and they determined the value was $500, which means that is the total amount I can deduct. They fail to indicate whether the car was kept (unlikely) or sold (likely). I call "bullshit."
While I will concede the car had several repair issues, I cannot possibly imagine that the fair market value of the car was a mere $500. I probably could have gotten more than $500 in cash just junking the car for spare parts. I will contact the charity, and try to address my complaints, but I have a feeling that is not going to get me far.
Unfortunately, I probably need to figure out if I want to sue this charity in small claims court. *sigh*
In 2004, the IRS closed that loophole and said that you could get an automatic fair market value deduction of $500. Now anything over $500 has to be determined 1 of 2 ways. If the charity kept the car, then the fair market value would be determined by the blue book minus any repairs. However, most charities simply sell the donated car and that sales amount is the fair market value. The IRS requires the sale be "arms-length" and in an "open market." Any deductions in excess of $5,000 require an appraisal.
Anyway... several days ago, rather than spend more money keeping my 1997 Toyota Avalon going or trying to sell it, I donated to one of the advertised charities. The "median" blue book value was $5,300. The "low" blue book value was $4,100. I just got the tax receipt in the mail from the charity, and they determined the value was $500, which means that is the total amount I can deduct. They fail to indicate whether the car was kept (unlikely) or sold (likely). I call "bullshit."
While I will concede the car had several repair issues, I cannot possibly imagine that the fair market value of the car was a mere $500. I probably could have gotten more than $500 in cash just junking the car for spare parts. I will contact the charity, and try to address my complaints, but I have a feeling that is not going to get me far.
Unfortunately, I probably need to figure out if I want to sue this charity in small claims court. *sigh*