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Under special circumstances, some charities can offer you a little bit of money for the donation you want to make, and you can still deduct most of the value of your donation. These transactions are called IRS bargain sales, or partial cash payments. While you need to be very careful that you meet all the requirements, they are a great way to both get a tax deduction, and make a little bit of income when you donate a car or boat or other vehicle.
The first thing to know is that the item being donated should be of significant value, like $1,000 or $5,000 or more. Most of the charities I've found that do partial cash payments only do them for expensive cars, or boats or recreational vehicles. You also need to know that while the IRS considers these kinds of transactions as "partly a sale" and "partly a donation". Also, for you to get the donation tax deduction on your income taxes, you'll need to be donating the item to a 501(c)(3) certified charity, and you'll also need to be filing the long form for your income taxes in order to itemize your deductions.
If any of that was confusing to you, call your tax preparer or accountant and have them walk you through all the rules about vehicle donations. It might also help to read the IRS's pamphlet on car donations, IRS Publication 4303: A Donor's Guide To Car Donations before you even call your CPA, just so you can start getting some of the terminology down, and that you have a general idea of the process. This article is really only to make you aware of IRS bargain sales, and give you the gist of how they work. To actually execute one, you should call a certified tax preparer.
The next thing to know is that not all charities can give you any money for your donation. In fact, after reviewing a couple hundred US charities, I would say less than 5% of them off partial cash payments. But that still leaves well more than a dozen across the United States. One of the best-known donation houses representing charities that also does IRS bargain sales or partial cash payments is Action Donation. They take cars, trucks, boats, motorcycles, rvs, yachts and more. They also have free pickup and speedy processing for all accepted vehicles.
Finally, here is the IRS's definition of a bargain sale: "A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each." So you'll need to calculate the adjusted basis of the donated item, or, preferably, have a tax preparer calculate it for you.
Pamella Neely writes about auto donations. Visit her site to learn how to get more for your car donation through the IRS bargain sale rules.
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