According to the General Accounting Office's (GAO) 2003 report to the Senate Committee on Finance, the incidence of mis-reporting from car donation programs was out of control. In 2005, some changes were made to the rules that govern car donations and the subsequent deductions that are allowed.

However, the report also showed that an alarming 95% of third-party agents that facilitated the donations for perfectly legitimate charities and non-profit organizations (NPOs) were for-profit organizations that ate up as much as 70% (and sometimes even more) of the profits from the sale of donated automobiles. This means that a very paltry amount of the proceeds from such sales were actually reaching the charities.

Car Donation is very popular because it is giving while getting something in return. A charity receives the car, sells it, and uses the profit to fund a cause, and getting something in return due to the tax breaks a donor gets.

What The Charity Does

A lot of people wonder how charities use the donated vehicles. Actually most charities, like the American Red Cross has their own used car lots. Others auction the automobiles to the highest bidder and then some simply use the cars in carrying out their mission.

To Use Or Not To Use

Not all car donation deductions are created equal – there are even cases where donating an auto in good faith can actually increase your tax owed under certain circumstances. Like anything else involving the IRS, the burden of proof is upon you, so the more information and documentation you have to back up your car donation deduction, the better.

In the 1990s and early 'aughts, it seemed you couldn't turn anywhere without seeing an ad or hearing a radio commercial, begging people for vehicle donations. These ads resulted in a massive increase in the number of cars donated per year, but the overall number still wasn't very high.

According to a General Accounting Office report to the Senate Committee on Finance made in late 2003, the actual number of individuals or small businesses that donated automobiles was less than 800,000. That means that fewer than half a percent of the nearly 200 million Americans who file with the IRS each year had vehicle donations to claim in a given year when the practice was at its height.

Car donation services have been around for a number of decades. These services allow an easy way to dispose of an ageing car and by donating it to charity. The donors will be able to avail of a lucrative tax deduction, while the charity can raise proceeds that normally do not come from cash donations.

Pioneered by the Davis Memorial Foundation in 1978, the service was launched to help the non-profit group become more competitive to the limited number of funds available in the US. Davies enjoyed minimal success in the program's first year, as only five cars were donated.

A trend is emerging; donating cars have become very fashionable. Does it mean humanitarian issues have become the forefront of America's priorities? Hopefully, but with the financial crisis, conceivably the tax deductions pose a greater advantage that the charitable one. If tax write offs are the biggest issue here, let us help our fellow citizens and immigrants not only get the tax reprieve you also help other people in the process.

Car Donation

Perhaps it must be reiterated that the definition of a car donation is a contribution towards an altruistic cause without repayment of any tangible gain. The gift is usually in the form of a car that has lost its use to the owners.

When making an auto donation, whether a car, truck or RV, may not actually be in your best financial interest when straight economics are concerned. Of course, charitable giving is it's own reward for many, but if you actually consult your accountant, you may not enjoy any additional incentive in the form of tax deduction, as is typically offered for most auto donations. Especially if your auto donation is worth more than $5,000, you should consider your actual benefit to accurately judge whether it's wise to donate your vehicle.

It could be said that the new regulations regarding car donation, going into effect during the 2005 tax season, actually make it easier to avoid audit, since there is far less wiggle room to maneuver within. However, to actually take a legal deduction from your taxes, there will need to be some forms filed and receipts gathered.

The state of Illinois features a host of charities that accept car donation. Making a car donation is a very effective way to help local charities and also help the donor dispose of an ageing car. In addition, making a car donation will make the donor qualify for a sizeable tax deduction.

Illinois is known for its cold weather and strong winds. Such conditions are very harmful for a car and greatly accelerate wear and tear. Ageing cars around the state can be easily identified in the streets with their poor shape.

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).