A charity car donation, like buying or selling a car, involves a bit of paperwork. To claim an automobile’s fair market value price or its selling price as a deduction, anyone donating a vehicle to a non-profit organization must make sure all the proper paperwork has been prepared. “When it comes to tax deductions, there's more to it than your tax bracket,” writes Joanne Helperin in "Does Charity Car Donation Still Make Sense Under Tougher IRS Rules?" on Edmunds.com. “For example, you can't take advantage of a car donation at all unless you itemize your taxes.”
While an accountant can advise on the best way to file for the deduction, a vehicle donor can make sure he or she has all the necessary paperwork from the car donation.There is different paperwork depending on whether the charity is going to sell or use the car, but the IRS requires certain information in all cases.
Required Information for All Car Donations
After receiving a donated vehicle, the charity will give the donor a Written Acknowledgment for Vehicle Contribution Deduction of More Than $500. The following must be included on that written acknowledgment:
- Name
- Individual Taxpayer Identification Number (ITIN)
- Vehicle Identification Number (VIN)
- Date of the contribution
The IRS also requires the non-profit organization to explain which of the following happened when the car was donated:
- The charity did not provide any goods or services in return for the donation
- The charity did provide goods and services in return for the donation
- The charity provided goods and services “entirely of intangible religious benefits”
“If the acknowledgment does not contain all required information,” advises the IRS in A Donor's Guide to Vehicle Donations, “the deduction may not exceed $500.”
Fair Market Value Car Donations and Deductions
Anyone making an automobile donation can only claim the actual selling price the non-profit receives if they sell the vehicle. In some instances, however, a donor may be able to claim what the fair market value of the car was on the day he or she donated it. These circumstances include the charity using the vehicle for its own non-profit services or making improvements and selling the car. If a vehicle donation program has a mission that mandates it to give or sell cars to needy people, the donor may also claim the fair market value.
Required Information for Fair Market Value Automobile Donations
In any of the above cases, the charity is required to make a statement about one of the following:
- If using the car, the non-profit organization must explain in detail what type of charitable work the vehicle is being used for and how long it will be used. The IRS requires “significant, intervening use” for a car donation to qualify under this instance. The charity must also certify that it will not sell the car before it’s completely done using it.
- If the charity will fix and sell the car, they must explain in detail what improvements they will make. They must also certify that they will not sell the vehicle before all improvements are finished.
- If a non-profit organization is going to give or sell a car at a very low price to a needy person as part of their mission, the organization must certify that giving or selling cars at very low prices to the underprivileged is part of its mission. A charity selling a vehicle and giving the money to a needy person doesn’t count.
Transferring a Title
A car donor should make sure to transfer the title and avoid any lasting liability from the vehicle. To do this, anyone making a vehicle donation should check with his or her state motor vehicle department. Most DMVs have a form to fill out to transfer the title, and some will also recommend removing the license plates.
