Spiffs are "gifts" given by charities in exchange for your donation. Sort of a gift with purchase, if you will. Common gifts for charitable car donations include airline tickets and vacation packages. They're not exactly gifts and there are terms and conditions of which you need to be aware.
Businesses know the value of free publicity and one way to get it is to make a deal with a charity. The business will provide access to their services or quantities of their products in return for the charity publicly offering them as incentives for donations. This is a win-win-win situation. The charity receives donations from patrons, the patrons receive a "spiff" in return, and the company that donated the spiffs receives free publicity. Everyone is happy.
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Let's say that when you make a donation, a charity is offering you a "spiff" of two free nights at a hotel at a popular tourist destination. Great. But what most people don't know is that you must declare the value of the spiff as income on your taxes. And yes, you'll pay income tax on that amount. This effectively reduces the net value of the tax deduction associated with your donation. This is not a big deal if the value of the spiff is negligible, but a large spiff can almost entirely offset your allowable tax deduction.
Oftentimes these spiffs can turn out to be a better deal than you can get or negotiate yourself.
Looking for tickets to the hottest show in town? Donate your car and receive two of these tickets in return. For some people, the intangible value received far outweighs the tax consequences.
Have you looked everywhere trying to find the newest, hottest toy for your child or grandchild? Charities keep up on these things and sometimes secure quantities of the hottest new products. They then run promotions enticing patrons to make large donations in exchange for receiving these hot products as a spiff. Even if the spiff eats up a large amount of the value of your actual donation, how can you put a price on your child's or grandchild's happiness?
Let's look at the downside of this practice. Say you're looking for a tax deduction of 0 dollars and you receive two tickets with a combined value of 0. Technically, you will only be allowed to take a charitable tax deduction of 0. And you must declare the 0 value of the tickets as income, which will then be taxed at the same rate as the rest of your income.
Another negative of this practice is that the spiffs are oftentimes difficult to use or cash in. Sometimes the businesses who donate them set up the redemption rules so as to make it extremely difficult to actually receive the value that they assigned to them and that you must now declare as income. These types of businesses are looking to "cash in," so to speak, on receiving a charitable tax deduction, but don't actually want to lay out the cash, product or service when it comes time for redemption.
There's also the potential for abuse by unscrupulous types. They may make a legitimate donation to receive the "spiff," but will turn around and offer it for sale at an inflated price, particularly if it is tickets to a must-see event or hot new product. This can adversely affect the reputation of the issuing charity.
The moral of the story is to educate yourself and deal with known, reputable charities.
The Pros and Cons of Receiving "Spiffs" in Exchange For Charitable Car Donations
If you want to donate your car to a reputable charity in Minnesota, visit http://wheelsforwishes.org/ or http://vehiclesforveterans.org/
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