Interested in donating a car to a non-profit organization and receiving a tax deduction? Here are some important things to know. In 2005, the IRS changed the rules on charity car donation. Currently, in most cases, a person may only claim the donated car’s actual selling price as a deduction.
How to Donate an Automobile: Choosing a Charity
The IRS urges people interested in charity car donations to make sure the chosen organization is legitimate. “Otherwise, your deduction will not be tax deductible,” they warn in A Donor's Guide to Vehicle Donations. A list of qualified organizations is available on the IRS website.
Know that many religious organizations, such as churches, synagogues, mosques and temples are not listed but are still considered qualified organizations by the IRS. If uncertain, double-check with the religious institution to find out whether they are qualified or not. Most importantly, know what the charity does with car donations. This affects the size of the tax deduction.
Charity Car Donation Scenario: They Sell the Vehicle
“Charities typically sell the vehicles that are donated to them,” notes the IRS. In this case, the vehicle donor is entitled to claim the actual selling price. If someone donates a car to a charity and the organization sells it for $3,000, the donor may claim no more than $3,000. Additional rules are that the non-profit organization:
- does not make any material improvements to the vehicle
- not use the car for long-term charity work (such as delivering meals, etc.)
- must sell the car to someone other than a needy individual
Non-profit Automobile Donation Scenario: They Use the Vehicle
If a charity uses a car donation to perform charitable work, the car donor may claim what the fair market value of the car was on the day he or she donated it. If a car has a fair market value of $4,700 when the owner donates it to a qualified non-profit which will use the car to deliver meals to shut-ins, the donor may claim $4,700 as a deduction.
If the charity’s work is based on giving or selling cars to needy individuals, the owner can also claim the vehicle’s fair market value as a deduction. Charity Cars, Inc. is an example. On their website, they explain that if a car is in good enough condition to serve as a program car for a needy person, the donor may claim fair market value. If the car isn’t suitable as a program car, Charity Cars will simply sell it. In this case, the donor may only claim the amount the car sold for.
Determining Fair Market Value for a Donated Automobile
The car’s owner is responsible for determining fair market value of his or her vehicle before donating it. Charity Cars recommends Kelly Blue Book as a resource. The IRS reminds car owners that they must find a price for the same make, model, accessories and condition as their present car. “Moreover, the fair market value of a vehicle cannot exceed the price listed for a private-party sale,” they advise. A car about to be donated to charity must have any appraisals done at least 60 days before donation.
Find out how to keep car donation paperwork straight in Proper Procedure for Car Donations.
 |
 |
