Most people assume that car donation and charity giving are tools the rich alone are able to use to ease their tax burden. This couldn’t be further from the truth! Anyone can file a tax return with itemized deductions if they bother taking the time and effort to do so. Though you are responsible for gathering receipts that back up your deduction claims, car donation for charity is now set up in such a way to make claiming the correct amount in deduction easier than ever.

In the case of car donation, charity organizations have been reliant upon donated items for a long time, though hardly as a large part of their overall donation dollars. In fact, a report issued by the General Accounting Office (GAO) in 2003, when levels of charitable giving was at its highest in terms of car donation, charity coffers were still little affected by the input of donated vehicles. As little as six percent of the “typical” charity was represented by car donation.

The self-employed are in an especially good position to take itemized deductions of monies turned back into the business as well as legitimate car donations. A charity that is sanctioned by the IRS and has a legitimate non-profit tax ID number should be more than able to provide you with the forms you need to make your deduction with the same confidence as any other type of deduction you save a receipt for.

Of course, individual returns are far more likely to claim the standardized deduction, making car donation to charity impossible to claim. However, filing itemized deductions can actually benefit most taxpayers providing they take the extra time to write them all down. Indeed, it is common for someone who had previously taken a standardized deduction to find their tax burden to be somewhat to significantly decreased as a result of this extra effort – as much as 30 or 40% in some cases.

With the extra money available for donation that can come from car donation, charity giving can be very useful for bringing one’s income down below the level where they might put you into a higher tax bracket. Near the end of the year there is often an increase in auto donation by those who are nearing a higher bracket they wish to avoid. This can save you quite a bit when done correctly.

Generally it is a good idea to not count on your car netting the sort of value at sale that you might imagine it would, given the Kelly Blue Book value listed. According to current IRS guidelines, car donation to charity that nets over $250 must be accompanied by a receipt that clearly outlines how much value the car actually was able to get (usually when sold on the wholesale or scrap markets) for the charitable organization in question.

Another potentially lucrative use of car donation to charity is using the donation amount as a deduction compared with the expense of fixing up the car yourself for sale later. Though this can actually save some people more money, one is liable for the capital gains of a vehicle that has appreciated since you took ownership at least one year previously. In the case of collectible cars that have already been fixed up, this can represent a real hit. Knowing what cars to donate and which ones to keep a hold of for investment purposes is highly volatile and subject to the other income specifics of such a donor.

It is always a good idea to talk to a CPA, especially if you already have the services of one retained for your regular tax preparation advice. If you own a business, this is especially true. Even the same car donation to charity can vary greatly in its value to an individual’s return.

Financial or business planning is at its most powerful when it is well integrated with one’s personal goals. And the ideal way to accomplish such an integration, at least for people with some degree of wealth, is starting a private foundation. Read on about why that is so, and how to go about it correctly.

Foundations can be the perfect solution to one of the vexing problems that wealthy families have — how to handle philanthropy the right way.

First, philanthropy can take many forms and once defined can still change from generation to generation. Most wealthy families tend to be giving. It’s part of the whole ethic involved in generating wealth — the idea of giving back. However, there’s usually a problem when this is done without proper planning: Giving back to one’s community becomes a misguided and vague self-imposed duty and not something that is done with joy.

Rather than give to those areas of need that are of a real interest to them, wealthy individuals tend to get hit up with an endless list of requests from charities. The unfortunate result is gifting with no sense of purpose. Even if they find areas of interest in philantropy, they’re rarely able to truly integrate them into their lives in a meaningful way.

This is unfortunate, because in philanthropy lies a tremendous opportunity for integrating the personal with the professional. From a tax perspective, wealthy people benefit greatly from making charitable gifts. So if their giving is coordinated with their personal interests and activities, the result can have a cascading positive effect on the lives the givers as well as the recipients. Bringing one’s charitable mission together in a coordinated way as to completely absorb one’s personal life is the ultimate leverage in planning and can bring order from chaos.

In order to reap the benefits from this process, a plan is essential. And starting a foundation forces the founder to come up with a plan, which starts with a mission statement. Just like the business plan, its for-profit cousin, the mission statement results in clarity as to how time, energy and money will be directed towards causes the founder or family wish to support.

When first meeting with clients in an effort to create that mission statement, I’ve always found it very helpful to start by asking the following question, “If you had all the wealth you needed and found you only had 2 years to live what would you do with the remainder of your life?”

The answers to that question will get them off to a great start with their mission statements. It helps them pinpoint their interests and forces them to come up with a plan on how to integrate them with their lives as well as their foundation.

The President of The Rockefeller Foundation spoke at the Global Philanthropists Circle 2006 Annual Meeting. For more information, visit www.synergos.org

At some point in our lives we will think about how we will be remembered.  Each of us seems to have an inner drive to live a life of meaning and to leave behind something of importance.  The measure of our lives in many ways is calculated in how we have helped others. This is our legacy.

We share the things of sustenance and discover love transcends our physical desires as we sacrifice a modicum of immediate gratification to share with those we love.  When we move beyond our tribe and family and share and give to others we discover philanthropy.  An examined life requires some form of charity, some way of helping others.

Intelligent charitable giving is the balance of the emotional impulse to do what is right with the rational calculation of doing the right thing.  We have time, knowledge and money to share with others to build a better community.  The giving of time and knowledge are quite straight forward.  We can volunteer with countless non-profits to provide assistance through an existing structured organization.  We can also can identify unmet community needs and organize people and resources to help mitigate those needs.

The giving of money can be as simple as writing a check or handing a few dollars to a worthy cause.  But, once we start to look at giving larger sums of money we need to understand the financial impact on our personal affairs.  We need to look at income and estate tax considerations and how the gift will impact our future needs.

To make intelligent gifts, we first separate giving into three components:  current giving, testamentary giving and planned giving.  Each meets a different aspect of our emotional need to give and our rational need to give intelligently.

Current Giving

Current giving generally includes cash or checks, but can also include property.  We give without expecting anything in return other than potential recognition and a tax deduction.  Obviously, once we have made this gift, we no longer have the proceeds available for our personal use.  Subsequently, these gifts tend to be smaller in nature as we give what we can afford.

Cash is the most financially expensive form of gifting.  In order for us to get cash to give, we must pay income taxes on some larger amount first.  The cash may come from receiving a pay check, dividends, interest or other forms of taxable income.

We can also give property.  Generally, it is more financially effective to give appreciated property such as stocks.  We can also give real property such as real estate, art and business interests subject to certain conditions.  If we give appreciated property the charity can sell the property and get the proceeds without paying taxes.  We get to avoid the capital gains tax on the appreciation making this type of gift more financially effective than simply giving cash.

Testamentary Giving

This type of gift comes from our wills or trusts and is given to the charity upon death.  We can make larger gifts as we no longer need the money.  We can give all sorts of money and property subject to the charity being willing to accept it.  Charities generally will not accept property subject to debt or legal obligations. The tradeoff comes from what we leave our heirs and what we give to charity.

There is less donor recognition from testamentary gifts.  We can tell a charity we will make the gift, but they know we can always change our mind so it is not a completed gift.  The act of providing for charity in our will gives us a sense of doing something of value and we can direct the money to causes dear to us.

Planned Giving

This tends to be the most complex form of giving.  It is a hybrid; bridging current and testamentary giving.  In allows us to make a large gift today as we control the gift while we are alive with the promise that it will go to charity upon our death.  We are able to get current income and estate tax deductions today and with certain types of planned gifts we can also get income for life.

This allows us to make much larger gifts as we hedge the potential that we may need benefits from this wealth during the remainder of our lives.  There are many forms of planned giving but the three most popular are:

Charitable Remainder Trust – These trusts are generally set up for life.  We contribute appreciated property to the trust and the trust sells the property and is exempt from capital gains taxes.  We have control over the proceeds and are given a specified income for life.  Upon our death, whatever remains in the trust goes to a charity of our choice. Private Foundation – Money or property is set aside in a legal structure to benefit society.  Those establishing a foundation are considered custodians of the public wealth and are subject to a variety of rules and regulations.  Donors have control over the wealth and can direct it how they see fit as long as they follow the rules.  They must give away at least five percent a year.  If the foundation earns more on its investments, the foundation can go on indefinitely.  Foundations can be complex and costly to run, but offer the donor control and a certain status in society. Donor Advised Fund – Existing charities formed under specific tax rules can accept donations and set these aside for the donor to make future gifts.  In some cases the donor can also advise on how the proceeds are invested.  Donors get the tax deduction today but can postpone the ultimate distribution of the gift to some future time.  It mimics aspects of a private foundation without the legal restrictions but also offers donors less control.

Taxes being taxes, the use of deductions comes with restrictions and complexities.  It is not a simple matter to give wealth away and take a tax deduction for it.  Larger gifts require planning for the financial impact to our personal lives along with ensuring we follow the rules to get the tax benefits.

We can make larger gifts than we ever thought by exploring the creative ways to give.  We can tap our need for philanthropy and get the dopamine running and maybe make society just a bit better.

A message to venomfangx regarding his charity policy and the changes that he must make in order for it to be acceptable legally and ethically. Here the the link to the charity drive that unffwildcard is running. www.firstgiving.com

One of the charitable trends in recent years is donating a car or other vehicle to a needy organization.  It helps them fulfill a need, and helps the donor with a nice tax deduction, right?  Well, maybe.   That’s because changes in the tax law over the past couple of years have made it less attractive to many people based on the charitable deduction they may get for tax purposes.

That doesn’t mean it’s not a great idea, or that charities could use the vehicle.  But there are some things to watch for if you are considering donating a car, boat, plane or other vehicle.   MSNBC has a nice overview of 10 Tips for How to Donate a Car to Charity.   This is great information, although it makes the process look somewhat cumbersome for the average person.  

1. Avoid Middlemen
2. Find a worthy charity.
3. Check the math.
4. Know the (tax/business) status of your recipient.
5. Do the delivery yourself.
6. Transfer the vehicle (title) with care.
7.  Your estimate of the vehicle value is probably wrong.
8.  Know when you can really report fair market value (FMV).
9.  Keep thorough paper records of the transaction.
10.  Pay attention to the details.

That’s a pretty good list of considerations, and the article discusses them fairly well. The Wall Street Journal also has some excellent advice, and Tom Herman from the Tax Report discusses how Car Donations have Taken a Hit in recent years because of the tax law changes, and some important considerations:

From the WSJ article: “If you do decide to donate your car, boat or plane, rather than selling it or trading it in, consider shopping around among charities. First, check to make sure the organization is legitimate. Then ask what it plans to do with your gift — and, if your vehicle, boat or plane is valuable enough, consider trying to find an organization that fits into one of the exceptions outlined above.”

“Choosing a charity is a very personal choice,” says Mr. Rosica of Ernst & Young. “For example, you may want to consider finding one that will use your car for its charitable purpose, such as delivering food or clothing to the needy.”

“Whatever the case, be sure to pay attention to the record-keeping and substantiation requirements. Also remember you’re eligible to deduct donations to charity only if you itemize your deductions on Schedule A of Form 1040, instead of claiming the standard deduction, the IRS said. And if you make a gift and get something significant in return from the charity, such as tickets to a sporting event, you can deduct only the amount that exceeds the value of what you received.”

Donating a vehicle can still be a very good idea, but it’s important to do a little legwork to make sure it works out the way you intended, especially regarding tax considerations.

It’s tax season in America, and regardless of how we give, there are often tax considerations as well.   If you are making donations, cash or otherwise, there may be deductions available that can lower the taxes you must pay on your income.  For larger donations of cash or valuable property, there may be limitations on the deductibility of such gifts based on your income.  It is also important to note that unless you are making donations to qualified charitable organizations or non-profit entities, you may be making a gift that will incur taxes…. that is taxes that you must pay to the IRS based on the size of the gift!  As an example, if you give your child or neighbor $20,000- you may have an obligation to file a gift tax return, and possibly even taxes to pay!  For 2007, we can give up to $12,000 per individual or entity tax free.  But above that amount you may have to file a gift tax return, although there is a lifetime gift exclusion of $1,000,000 at present.  It’s important to know that handing money around freely may have tax ramifications.   It may be wise to see your tax planner or CPA to assess your current situation and make an informed decision that benefits both the charity and your tax liability.  Here’s a list of useful links on taxes and charitable giving:

• Fairmark’s Tax Guide has an excellent multi-page overview of the Tax Rules for Gifts.
• A short overview on tax considerations is discussed in The Tax Perks of Charitable Giving from SmartMoney.com.  
• For those who may make larger cash donations and have trust or estate planning concerns, T. Rowe Price has a nice overview of The Tax Value of Charitable Giving.
• For detailed tax regulation information, see the most current IRS guidelines found in IRS Publication 526 (this is a .pdf file- if you need Adobe Acrobat Reader, you can find it here).