Car Donation Scams
Donating Your Car?

The ads are everywhere, encouraging you to ''Donate Your Car....Get a Tax Break!'' And they're doing their job: In large urban areas, such as New York and Los Angeles, some 10,000 cars are given away to charity and resold each year, Be aware of car donation scams.

Car Donation Scams

Such car donation services let you ditch an old clunker, help a good cause, and get a tax break. When you factor in the hassle and haggling involved in selling or trading in the car, donating it to charity...often looks good.

Where Does Your Money Go?

Before handing over your car keys, you should know that the bulk of your donation may not be going to the charity. In fact, many charities rely on for-profit brokers--often towing companies or used-car lots--to pick up and sell the cars. These middlemen may pocket most of the money from the sale, passing on only a small flat fee or tiny percentage to the car donation charity.


How to Determined If a Third-Party Broker Is Involved

To determine whether a third-party broker is involved, just call the advertised number, or the charity directly, and ask. Regardless of how the charity gets the cars, at least 60% of your donation should go toward the stated mission.

You can determine how a charity spends its funds by asking for its annual report or Internal Revenue Service Form 990. Some charities disclose this information on their Web site. You can also contact your state attorney general's office and local Better Business Bureau.

To confirm that the organization soliciting your donation is a legitimate charity request its IRS Determination Letter, verifying its tax-exempt status under section 501(c)(3) of the Internal Revenue Code. Or you can look up a tax-exempt entity on  the Internal Revenue Services Website.

 Keep in mind that the law does not require churches to register for tax-exempt status.

If you choose to donate a car, donate it to a charity you know, a charity that is not on a list of questionable organizations, and a charity you can call and verify its participation in the ad you see. Also ask what that charity is likely to receive as a result of your car donation.