Are you considering donating your car to a charity? If your donation meets certain requirements, you may be able to get a tax deduction for the donation.
IRS Publication 4303 provides general guidelines for individuals donating their vehicles to charity. Publication 4303 is not designed for corporate donors. Publication 4302 provides guidelines for charities that actually receive the donations.
The first think you need to do before you donate a vehicle to charity is to make sure the charity is a qualified organization. These are most commonly Section 501(c)(3) organazations, such as charitable, educational, or religious organizations. To verify if an organization qualifies, you can refer to IRS Publication 78, Cumulative List of Organizations, which is an annual listing of most charities. That publication is available online and most libraries have a copy. You can also call the IRS at 877-829-5500. Make sure that you have the charities correct name and address before you call or try to look it up.
Next, you may only deduct the donation of your car if you itemize your deductions on IRS Form 1040, Schedule A.
There are limitations on charitable contribution deductions. The IRS lists the example that your deduction can not exceed 50% of your adjusted gross income. Other limitations may apply, and IRS Publication 526, Charitable Contributions provides detailed information on the limitations.
A qualified motor vehicle is any motor vehicle manufactured primarily for use on public streets, roads and highways. You can also donate a boar or an airplane. Car dealers may not, however, donate a car from their inventory of cars to be sold, and get a tax deduction.
When you donate the vehicle, you will need to get a written acknowledgement from the charity. If the charity sells the vehicle, your deduction will be limited to the gross proceeds of their sale of the vehicle (with certain exceptions). The written acknowledgement must contain your name and taxpayer ID number, the vehicle VIN number, have the date of the contribution, and one of the following items: (1) a statement from the charity that no goods or services were provided by them in exchange for the donation, (2) a description and good faith estimate of the value of the goods or services that the charity provided in exchange for the donation, or (3) a statement from the charity that any goods or services provided by the charity were entirely of intangible religious benefits. If the acknowledgement does not contain all of the required information, the tax deduction is limited to $500.00.
If the charity sells the car that you donate, your deduction is limited to the gross proceeds the charity gets from the sale. In this case where the car is sold by them, the written acknowlegement must also contain (a) a statement certifying that the car was sold in an arm's length transaction to an unrelated third party, (b) the date of the sale, (c) the gross proceeds of the sale, and (d) a statement that your deduction may not exceed the gross proceeds of the sale.
All that said, there are still exceptions to the gross proceeds limits. You may be eligible to deduct your car's fair market value on the date you donate it if the acknowledgement contains a statement from the charity certifying that it intends to make significant intervening use of the vehicle, with a detailed description of the planned use, how long they intend to use it, and a certification that the vehicle won't be sold before they are finished using it.
Another exception is where the acknowledgement contains a statement where they certify that they intend to make a material improvement to the car, a detailed description of the intended improvements, and a certification that it will not be sold before completion of the improvement.
A third exception is where the acknowledgement contains a statement certifying that they intend to give or sell the vehicle to a needy individual at a price significantly below fair market value, and that the gift or sale is in no direct furtherance of their charitible purpose of relieving the poor and distressed or the underprivileged third party who need the car as a means of transportation. Note that this exception does not appply if the charity merely applies the sale proceeds to a needy individual for some charitible purpose.
If the acknowledgement indicates that the car or vehicle sold for $500.00 or less, then you may claim the smaller of the fair market value on the contribution date, or $500.00, provided that you get a written acknowledgement from the charity that complies with the requirements spelled out in Written Acknowledgement For a Vehicle Contribution Deduction of $500.00 or Less.
With respect to your IRS 1040 tax return, you must attach the written acknowledgement from the charity if you are deducting more than $500.00. You should obtain and keep records and file a statement to substantiate your charitable contribution. For donations of $500 to $5000.00, you must fill out and attach to your taxes, Form 8283, Section A. If the deduction is over $5000.00, you must fill out Section B of that form, and include the signature of an authorized official for the charity, and attach both to your tax return. Additionally, you must get a written appraisal for the car from a qualified appraiser (as described in publication 561), and the appraisal must be made within 60 days of the date of your donation. The appraisal must be in your hands before the date of the tax return on which you first claim a decution (including extensions). If the deduction was not claimed on an initial tax return, but was instead claimed on an amended return, the appraisal must be in your hands before the filing date of the amended return.
If From 8283 Section B was required and the charity sells or disposes of the vehicle within three years after the date they received it, they must file Form 8282, Donee Information Return, with the IRS - and give you a copy, idenfifying you as the donor, and include the amount the vehicle received when finally sold.
Related Forms and Publications are as follows: