If you’ve bought yourself a new car and are looking to get rid of your old one, or simply want to get rid of a car, consider donating it to an organization that accepts car donations. Selling the car will almost always be better than donating from a financial standpoint, but donating offers benefits that may trump the money depending on your situation. After detailing five reasons why you should donate your car, I’ll give a few scenarios where donating is better than selling.

Here are five solid reasons why you should donate your car:

#1. Selling Is A Pain

Selling a car is a pain in the ass. First, you’ll need to advertise somewhere. You can put it on Craiglist or eBay and do the new school thing, or go classic and chalking up “For Sale” on the windshield and leaving it by the road. If you go with Craigslist, you have to deal with all the local flakes, crazies, and lowballers who are looking to snatch up a good deal. With eBay, well, you have to deal with the national flakes, crazies, and lowballers who may or may not rip you off. If you leave it by the road, it might get towed, it might get broken into, or you simply won’t get enough interest. It’s no secret that selling a car is a pain.

#2. A Wonderful Tax Deduction

If you’re already a charitable person, consider donating your car rather than cash. While it is a bit more work for your charity, it’s still a win-win for both parties. Most charities that accept vehicle donations know what to do with them, so really there is minimal headache on your part. Most will be able to appraise your car or simply offer a receipt that lists the Kelley Blue Book, NADA or Edmunds private party value as long as it’s under $5,000. If it’s over $5,000, then you’ll need an independent appraiser but that’s usually not a big deal.

#3. It’s Done As-Is

If your car needs improvements, then the organization will make them and list the improvements on the tax receipts. You won’t have to fix up problems with your car beforehand. While you could sell your car as-is on the open market, chances are the number of interested parties is going to diminish tremendously. Prospective buyers will want to have a mechanic check it out, they’ll take it for a test drive, and they’ll otherwise need to go over the car with a fine toothed comb. You can’t fault them, if you were going to drop a few thousand dollars on anything, you’d go over it with a fine toothed comb too.

#4. It’s Fast

Want to donate? Call up the organization and let them know. They take care of it all from there. Think of all the time you’ll have saved by not having to show the car, not having to go on test drives, not having to meet prospective buyers in a random parking lot, not having to give out your private information to strangers, and not having to worry about whether you’ve missed anything (taxes? sales receipt? title?). The organization takes care of it all (many offer free towing too!).

#5. It’s A Good Thing(tm)

At the end of the day, you know that you’re doing something that helps an organization and its members. By selling, you don’t get as much for your car as you would by selling it (presumably). If your car is worth $5,000, you get a $5,000 charitable deduction off your income for the purposes of taxes. If you’re in the 25% tax bracket, then the deduction is worth $1,250 of cold hard cash. If you sell the car for $5,000, then you get $5,000 of cold hard cash. It’s a significant difference but ultimately you’re doing a tremendous service to that charitable organization.

When Donating Is Better $$$

If your car needs extensive repairs before you could sell it and you don’t have the funds to repair it, donating is going to be a better option for you. My wife’s car had a blown head gasket that pretty much killed the engine on her car. If she wanted to sell it, she’d have to overhaul the entire engine and that would’ve cost a significant amount of money. So instead, she donated the car to the local school so that the shop class could work on it. She received a sizable charitable donation receipt, the school received a car they could work on, and everyone was happy.

(Photo: orinrobertjohn)

I was really surprised when I heard about the Kiva BusinessCard, a credit card offered by Advanta, because it sounded asymmetric with the types of offers credit cards usually have. Advanta has been really innovative in the types of cards they’ve been offering, trying to capture those smaller markets, and I believe this card is yet another attempt to do so. First, they were offering up a business credit card online marketers, now they’re offering a business card with a philanthropic twist known as the Kiva BusinessCard.

Kiva, a program I’ve only written about briefly in the past, is an international, philanthropic microlending organization. They give loans to aspiring entrepreneurs in developing countries in an attempt to lift them from poverty, you can read more from their about page. It’s the embodiment of the old maxim: “Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime.” I wrote that in the past I would give it a try but that fell on the back burner as, at the time, many of their loans were 100% funded.

So, what is Advanta offering with their card? If you offer a loan through the Kiva system, paying for it with the Kiva BusinessCard, they will match it dollar for dollar up to $200 per month. In actuality, since Advanta won’t know the exact loan you’re funding, Advanta supplies the funds to Kiva and they loan it out as needed but the intent and effect is still the same - an aspiring entrepreneur gets funds they otherwise wouldn’t get if you used another card. After the loan is repaid, the funds are given back to Advanta, just as they are to you after a loan, but they retain it (you have the option of retaining it or making another loan).

The 5% bonus cash back transaction categories are Kiva loans and charitable donations of up to $1,200 a year; 1% on everything else with no limit. $1,200 isn’t a tremendous amount but that’s 5% more you can give to charitable organizations each year, not counting the charitable income tax deduction you’d get.

Some other notable features of the card:

• 15 month 0% APR balance transfer promotional period,
• $0 fraud liability,
• No annual fee

It’s an interesting offer, wonder how popular it’ll be.

I always suspected that not all the panhandlers (or beggars, whatever term you prefer) were in the situations they claimed to be in and had heard unsubstantiated stories about “professional panhandlers.” One rumour back in Pittsburgh was that a particular panhandler on Forbes near PITT owned an Escalade (this was something I heard eight years ago, before high gas prices) and was seen turning the corner and hopping in it after “work.”

(read full article…)

You can delay the reaper but you can rarely totally avoid him and this past week Linens ‘n Things filed for Chapter 11 bankruptcy, a few weeks after they were originally predicted to have succumbed. If you read my post about how they were going under and how you shouldn’t hold onto gift cards, then you wouldn’t be one of the 400,000 customers stuck with $42M in worthless gift cards.

Mrs Micah talked a little about contributing to presidential campaigns and how the contributions amount to very speculative investing. It’s an interesting thought, especially after noting people contributing to “lost cause” campaigns like Huckabee’s, that definitely gets you thinking. I was never one for political campaign contributions, I think my money is better served going towards health/medical related charitable causes.

Lastly, JD has a fine post on high-yield savings accounts that lists rates and features of each bank. I’m quite partial to my own list of best online savings accounts but I’m a little biased.

An article in LifeScience says that the key to happiness is to spend your money on others. It could be charitable donations to a worthy cause of choice or it could be buying gifts for friends and family members, but the warm and fuzzies lasted much longer if you spent the money on others than if you spent it on yourself. “New research reveals that when individuals dole out money for gifts for friends or charitable donations, they get a boost in happiness while those who spend on themselves get no such cheery lift.”

One of the teams involved in the experiments theorized why this was the case and had a few decent theories. One theory, one that I thought made the most sense, was that people spend a lot of money to make their lives seem more “meaningful, significant, and important,” and that giving away money is a much more effective way of doing that. If you impact someone else’s life in a positive way, that certainly gives you more meaning, significance, and importance than you did if you spent it on yourself.

What’s funny is that I said something similar my wife while we were on our honeymoon. I mentioned that it’s much easier for me to spend money on other people, such as gifts on her (which she smiled at and then hit me), than it is to spend on myself. If I want to buy a new bicycle, for example, I’ll spend way too long researching different bicycles, comparison shopping, and price searching before I’ll pull the trigger (I’m still “researching,” it’s been nearly a year).

Part of the reason is because I want a good deal but I also have to get over the fact that I’m buying something selfish that I could save for the future, either for my retirement, my future children, etc. However, last year we donated money to charity last year in relative blink of an eye (there was some research on Charity Navigator) and I attribute that to the lack of the “selfish” hurdle (the tax deduction helps too). Of course, the happiness (and heart-wrench, if that’s a word) from receiving letters from organizations like Operation Smile (it’s a charity my mom told me about and supports) and the kids that have benefited from its work do help as well.

As an extension of this, I bet that the same happiness effect would apply if you spent time volunteering rather than working on a particular day (or weekend). It’s not as quick as spending money, but perhaps the happiness effect would be more pronounced. Either way, the lessons seems to be that if you want to make your life a little brighter for a little longer, do something philanthropic today. You can always get that bicycle tomorrow (or the next day, or the next day).

Earlier this year I discussed how I was going to follow Flexo’s lead and open up a Fidelity Charitable Gift Fund. The idea behind the Fidelity Charitable Gift Fund is that you can make a charitable donation now, have the assets appreciate, and then decide where donations will go later on. Much like how a mutual fund is actually an organization, the Fidelity Charitable Gift Fund is an organization. When you donate money, you are donating to the Fidelity Charitable Gift Fund and you have two options as to where the money goes. You can either open up a Giving Account under your name (or any name you wish) or open up a Pooled Income Fund.

Giving Account

This is the type of account Flexo talked about and one that I was seriously considering. What you do is open a Giving Account, contribute funds, direct how the funds are to be invested, and then recommend grants. You will notice that all the documents say that you will “recommend” which organizations will be the beneficiary of your funds, but they aren’t legally bound to honor your wishes. I think that specific language is used for legal purposes but they honor most recommendations.

Pooled Income Fund

This is the second option and one I hadn’t considered. It’s part charitable fund and half income generation, akin to an annuity, though the final payout goes to a charitable organization (up to 10). So let’s say you contribute $10,000. You direct where the contributions will be invested and you can select up to two beneficiaries. Each quarter, the proceeds from your investments will be paid out to the beneficiaries. Upon the death of the final beneficiary, the value of the account goes towards charities. It’s different than the Giving Account and less desirable for what I’d like to accomplish.

Considerations

So, it sounds pretty easy right? Why wouldn’t everyone do this? (these concerns cover only the Giving Account)

• Initial limits and fees: The initial contribution has to be greater than $5,000 and each additional contribute has to be greater than $1,000. The fees include the expenses of the investments plus an Annual Administrative Fee. The administrative fee is the greater of 0.60% of the total fund value or $100 for the first half million, 0.3% for the second half million, 0.2% for the next million and a half, and 0.15% for the rest up to five million. Beyond that and the fees are different. If you were to contribute $5,000, you’d be talking an administrative fee of 2% plus the underlying investment fees. If you don’t have $5,000 or you don’t want to pay any of these fees, you might want to just donate directly to a charity.
• Time horizon: Since you do select investments for your contributions, there is the potential that your investments will lose value. So, if you plan on doing this, contribute funds you think you might want to use next year or the year after (or, ideally, in five years). Increasing the time horizon will smooth out the random walk of the stock market.
• Tax benefit: As much fun as it would be to have the Jim Charitable Trust, the tax benefits are better if you contribute appreciated stock. When you donate appreciated stock that you’ve held for over a year, you can deduct the entire value of the stock from your income, including the appreciation. (For more on that, read this article about reducing your capital gains by donating stock) With the Giving Account, you deduct your initial contribution and not the amount actually granted, so you never actually benefit from the appreciation (but you can donate appreciated stock).
• Grant exclusions: Almost any recommendation you give will be accepted with the exception of several groups, though there are very good reasons. For example, you cannot recommend any donation that would result in you receiving any sort of gift or preferential treatment. The list is available here.

I’ll be honest, the idea of opening a small charitable gift fund in our name does sound like fun and it would be great to be able to leverage the market to help further our philanthropic goals but with a $5,000 start price and those annual fees, I may wait a little while before opening one up. The uncertainty of the market (and a short time horizon) are also serious considerations as well… what do you all think? Good idea? Bad idea? Wait? Go now?

When I grew up, I never really thought about donating my hard earned money towards any sort of charity or cause outside of buying some raffle tickets or dropping a dollar or two into the Salvation Army bucket. Now that I’m a little bit older and with a little more discretionary income, I’ve come to appreciate the importance of “large donations” (anytime you pull out a check or a credit card, I consider that large) because a lot of organizations rely on that income in order to continue to do their good works.

So, as I’ve done in the past, I’ll be donating money to the American Cancer Society and I ask that you find it in yourself to put a little bit extra in their stocking as well. Why the ACS and not some other organization? My grandmother suffered from and ultimately succumbed to cancer several years ago when I was in college and so it’s a cause I find myself easily supporting.

Originally, I was trying to get other personal finance bloggers to chip in $100 to the ACS and I was going to do a series of posts highlighting those bloggers but perhaps due to the Thanksgiving holiday or bad timing, only four bloggers took me up on the offer. So, I wanted to especially thank Ricemutt of Experiglot, Tricia at Blogging Away Debt and Nickel at Five Cent Nickel, all of whom sent generous donations to the ACS without even asking what was up my sleeve. I also wanted to thank Blunt Money for telling me that she would chip in some once I solidified what I was going to do.

So instead of a “twelve days of giving” as I originally planned, I’m just going to ask you all to find it in your hearts send a little money towards the ACS this holiday season. I’ll also be compiling a list of donors after the jump. (there are also the rules for appearing after the jump)

Donate To The American Cancer Society

Rules For Donor List:
Readers: If you’re just a reader, just send me an email of how much you’ve donated to the ACS and whether this post led you to donate and I’ll put you on the list (You can say you’re Mike from Baltimore if you’d like).
Bloggers: If you are a blogger and want to appear on the list, plus a link, simply send me a screenshot (you can blank out everything except your name, the date and the amount) of your donation over $20 to the ACS and you will be listed. I also ask that you link to this charity drive post as well. (If you don’t care about the link, just send in your info like a reader) Thanks!

Donate To The American Cancer Society

Total Contributions: $1170

Generous Donors:

1. Ricemutt of Experiglot - $100
2. Tricia at Blogging Away Debt - $100
3. Nickel at Five Cent Nickel - $100
4. Jim at Blueprint for Financial Prosperity - $500
5. Blunt Money at Blunt Money - $100
6. Frugal Frugalson at Picking Up Nickels - $250
7. Hydroponics & Grow Lights - $20

Thank you!

With my girlfriend wanting to donate a car, my roommate donating old furniture, and minor cash donations, I thought that I’d do a little research into the rules and procedures governing the deduction of donations from your taxes. It’s a little early, considering 2005 tax returns aren’t due for another ten months (tick tock!), but it’s better to know the procedure before crunch time than scrambling last minute.

Eligibility:
In order to deduct charitable donations from your taxes, you basically need to satisfy two conditions:

1. Itemize Your Deductions - Folks taking the standard deduction won’t get a tax benefit for charitable donations.
2. Donate to a Qualified Organization - Normally you can just ask and they’ll tell you, but IRS Publication 78 (it’s been upgraded to a search and is not a PDF) has a list of the common ones.

What You Donate:
The easiest thing you can donate is cash. You deduct the actual cash amount you donate.

The simplest things you can donate is property of some kind - whether it be a car, clothes, furniture, land, or any number of physical item. The general rule is you are able to deduct the fair market value of the item, as governed by the rules of IRS Publication 561 - Determining the Value of Donated Property. The rules for donating cars have changed recently from fair market value being determined by a blue book value to the actual price the car is sold for at auction.

If you donate your time and services, you cannot deduct any of it. You can’t take the fair market value of your service or anything like that, but you can deduct some personal expenses you wouldn’t have incurred had you not donated your services. An example is that you can deduct the cost of transportation to the location you are donating your services but you wouldn’t be permitted to deduct the cost of meals (since you would presumably have eaten regardless of your philanthropic efforts).

When You Donate:
The timing of your donation will affect when you can deduct it. It was easier back before checks and credit cards because you could control when items left your possession. For property, as soon as it leaves your hands you can count it in that year. For cash, the same rule applies as well. For checks and credit cards, you can deduct it the year in which you mail the check or apply the charge - not when the check is actually cashed or when the credit card is paid for.

Deduction Limits:
If you donated less than 20% of your adjusted gross income (AGI), move on, this won’t apply. Otherwise, the rules state that the most you can deduct is 50% of your AGI and, depending on your property, this limit may be capped at 30% and 20%. The rules are pretty extensive and probably don’t affect many people so I won’t go into them, check out pages 9 and 10 of Publication 526 for the rules.

Records:
Since you’ll be reducing how much Uncle Sam gets, they might come ask you about it. For cash donations, if it’s under $250, just keep a receipt of the donation or some other personal record of it. The rules for under $250 are pretty lax since for $20 donation to your church you probably don’t get a receipt. If you donate more than $250, you need to get an acknowledgement from the receiving organization that must meet these criteria: date, donation amount, what you received in return, description and good faith estimate of the value of the donation.

For property donations, the records you must keep are pretty extensive. The rules are basically the same for under $250 (date, location, description of property, and organization) and over $250, except if the property is over $500 but under $5000, you will need to explain: how you received the property, when you received/created it, and your cost basis. If it’s over $5000, then you will need a qualified written appraisal of the property in addition to everything else before it. So to recap, if you donate a $10,000 car you will need to follow the rules for under $250, between $250 and $500, between $500 and $5000, and then the final rule of over $5000 donations. It’s a lot of paperwork!

I hope all this information was helpful and, more importantly, correct. If you notice any inaccuracies or errors, let me know and I’ll fix this post. Thanks!

Helpful IRS Publications:
IRS Publication 526 - Charitable Contributions
IRS Publication 561 - Determining the Value of Donated Property

So on the front page of Yahoo! Finance there’s an article by Kay Bell from Bankrate.com titled “15 common tax-filing mistakes you can avoid” (article removed from site) that posted yesterday. Most of these errors are simply careless. It’s like when you took that arithmetic test in elementary school and did all the math in your head because you thought you were smart. You are smart… you just mess up sometimes. With Free Tax Filing (endorsed by the IRS!) and lots of free e-Filing methods, there is almost no excuse for any of these “mistakes.”

Here is the list:
1. Making math errors
2. Not including Social Security numbers
3. Not signing and dating your return
4. Not using the preprinted label and envelope from the tax package
5. Forgetting about interest and dividends
6. Forgetting to claim charitable donations
7. Not including all your forms
8. Not properly tracking your investment basis
9. Using the EZ form when a longer form could cut your taxes
10. Making the check out incorrectly — and forgetting to sign it!
11. Forgetting to bunch your deduction
12. Not taking all the credits you’re eligible for
13. Using the wrong tax table
14. Missing the deadline to request an extension
15. Not putting the proper postage on your return package

I put in red every “common mistake” that is automatically avoided as a result of using tax filing programs and using e-file. The only ones I can see that you might mess up on is not bunching your some of your deductions and tracking your investments. It makes no sense not to use a free program (you can even print out a return if you want to tempt fate and try to make errors 3 and 15) and I don’t see a benefit.

TurboTax does everything online so you don’t need to download a program you’ll never use again. (Read a review of TurboTax) Don’t want to send anything unnecessary online? Try TaxAct. Download some software and run it all locally. (Read a review of TaxAct)

There is no reason why you shouldn’t do your taxes electronically and there are at least 15 common reasons why you should.