Washington (Dec. 17, 2003) -- Taxpayers contemplating donating their car to charity beware -- your donation may not go as far as you think.

Taxpayers who want to donate their cars should ask questions and carefully consider just how much of the proceeds from the car will go to their intended charity, the Internal Revenue Service warned.

“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."

In one donation reviewed by the General Accounting Office, 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 recommends that prospective donors check that the organization is qualified, make sure they itemize in order to benefit, deduct only the car's fair market value, and document the donation and its fair market value. Record-keeping requirements vary depending on the amount of the contribution and the total amount of the charitable deduction.

Of 129 million individual returns filed for tax year 2000, the GAO estimates that 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.

-- WebCPA staff

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