Though the average person who was liable to donate a car to charitable organizations once included just about everyone in the late 1990s and early ‘aughts, changes in IRS regulations and rules governing deductibles since 2005 has made for a subtle demographic shift towards the upper-middle class with regards to just who will donate a car to a charitable or non-profit organization (NPO).
This is true for several different reasons. For starters, those who are self-employed are far more likely to take itemized deductions since such workers have far more upward mobility than a given employee. They also tend to make a lot more from such ventures. Self employment also means that you pay your own contributions as well as those normally picked up by an employer. This double taxation leaves many of the self-employed on a constant lookout for deduction possibilities. When you donate a car to charity you can make up several thousand dollars at a time in deductions – sometimes enough to bump you into a lower bracket.
Of course, not everyone who wants to donate a car is interested in the deduction. There will always be people who just want their old junker cars to go away and many of the ads imploring you to donate a car rely upon the offer of free towing (and sometimes a hotel or cruise voucher) to help get low-value cars from far less off individuals than the PhDs who are donating perfectly good cars.
However, in yet another installment of how it pays to have a few extra coins to rub together, those who are able to afford to give a working car find that it is likely to be used for transport rather than sold at wholesale auction. This other type of use occurs when you carefully choose a charity you trust, donate a car to it and find out 3 years later that it’s been used for various official functions and as transport for in-house needs that furthers the mission of the charity.
As such, those who already have some extra money to throw around are more likely to get the higher deductible that they’re more likely to be able to capitalize upon in the first place. That means the demographics of someone looking to donate a car have somewhat suddenly moved back to where they were before the advertising push of the 1990s. Though many middle class people might donate a car that doesn’t run very well, they won’t enjoy the higher level of benefits that a better quality donation typically garners.
But other than wealth, the other demographics of those who participate in charitable organizations when they donate a car include many of those who grew up using, or recently used, the services of such an organization. This gives one a good idea as to how non-monetary benefits work in the real world. The chance to give back to an organization that has helped one get back on their own two feet is an invaluable feeling of pride and accomplishment that the IRS cannot put a value upon.
So, despite recent setbacks in deduction amount for the typical donation from a mid-level income individual or family, this hasn’t stopped a segment of the population from donating scrap cars that they simply want hauled away as junk. This is especially true in the case of vehicles that have no chance to have a useful resale value whether conducting the transaction yourself or letting a car donation service take care of it.
The main difference between the classes of donation that have sprung up since the 2005 ruling means that if you choose to donate a car, it may not be very lucrative for the charity in question unless it’s running well and worth their while to fix up for use (rather than selling on the wholesale market), even if they don’t use a third-party donation agent.
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