What type of person will donate a car to charity?  In the 1990s and early 2000s an average wage earner was as likely as anyone else to donate a car to charitable organizations.  Certain changes in IRS rules from 2005 on, governing deductions, has changed things.  Now there has been a shift of who donates a vehicle to charity.  It is more likely to be the upper middle class and above who donate to non-profit organizations.

There are various reasons this is true and one of the main reasons is the value of tax deductions to the wealthier is greater than to the less wealthy.  For instance, a self-employed person making good money is constantly looking for deductions to lower their net income, simply because they get taxed on their business income and personal income.  Seeking as many deductions as possible is a priority for the self-employed, since it is almost as if they are double taxed.  Donating a car or other vehicle such as a boat, to charity can make up several thousands of dollars in deductions.  This can even move a wealthier person into a lower tax bracket if they were close to begin with.

There are many people who do want to donate cars just to get them off of their property or away from their house or business.  Many of the companies working on getting donated vehicles have taken advantage of this want, and will offer incentives such as free towing, or travel vouchers.  The market for donations of junk cars is constantly growing, and there is more than one company willing to help take your junker away.  The market for donations of newer, nearly perfect cars is there but not as nurtured by charitable organization middle-men.  However the tax deduction for newer, running cars is greater than for a junker, so the wealthier individuals who can afford to give away still-running cars get a better deduction in the long run.  IRS rule changes have also contributed to better deductions for better cars.

So those who already have extra money to waste can get better deductions than those who are simply trying to get rid of a piece of crap car.  The rich are catching on to this.  This has in fact lessoned the middle and lower classes desire to donate cars, and so more of their cars are just sitting around.  In essence the demographics of who donates cars are what it was when vehicle donations first began.  The only incentive for the middle class or lower to donate is to simply get rid of the vehicle. So two factors are at play, those seeking deductions and those looking to get rid of junk.

But other than wealth, the other demographics of those who participate in charitable organization donations include many people who grew up with or recently used the services of such an organization.  This is gives us 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 IRS setbacks in tax deduction amounts for the typical auto donation for mid-level income individuals or families, it hasn’t stopped a segment of the population from donating junk cars that they simply want towed away.  But if you choose to donate a car, it may not be very lucrative for the charity in question unless it is running well or worth their while to fix up for use or resell.

This entry was posted on Sunday, December 14th, 2008 at 4:18 am and is filed under Taxes And Auto Donation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.