IRS Regulations regarding tax deductability of Car Donations
If you donate a car to a qualified organization after December
31, 2004, your deduction is limited to the gross proceeds from its
sale by the organization. This rule applies if the claimed value
of the donated vehicle is more than $500. However, if the organization
makes significant intervening use of or materially improves the
car, you generally can deduct its fair market value.
Boats, aircraft, and other vehicles.
These rules also apply to donations of recreational vehicles, campers,
boats, aircraft, and any vehicle manufactured mainly for use on
public streets, roads, and highways.
Acknowledgement required.
If the claimed value of the car is more than $500, you must have
a written acknowledgement of your donation from the organization
and must attach it to your return. If you do not have an acknowledgement,
you cannot deduct your contribution.
The acknowledgement must include the following information.
- Your name and taxpayer identification number.
- The vehicle identification number or similar number.
- A statement certifying the car was sold in an arm's length transaction
between unrelated parties.
- The gross proceeds from the sale.
- A statement that your deduction may not be more than the gross
proceeds from the sale.
- The date of the contribution.
However, if there was significant intervening use of or material
improvement to the car by the organization, the acknowledgement
does not have to include the information in items 3, 4, and 5 above.
Instead, it must contain a certification of the intended use of
or material improvement to the car and the intended duration of
that use and a certification that the vehicle will not be transferred
in exchange for money, other property, or services before completion
of that use or improvement.
This acknowledgement must be provided within 30 days of the sale
of the car or, if there is significant intervening use or material
improvement of the car by the charity, within 30 days of the date
you donated the vehicle.
The organization or charity also must provide this information
to the IRS.
Donations of inventory.
These rules do not apply to donations of retail inventory. For
example, these rules do not apply if you are a car dealer who donates
a car from your inventory of cars for sale to the public.
More information.
The IRS expects to issue more guidance on these rules early in
2005.
Be Cautious and Be Informed
If you donate a car to charity, you can't be sure of the amount
of the deduction until the charity actually sells the vehicle and
reports the sale price to you. Also, since charities often sell
vehicles at auctions, the selling price could be much lower than
the fair market value. So be prepared, you may not get the velue
you expect.
New IRS Publication
The IRS has issued new guidance for those individuals wanting to
donate their car to charity. It is Publication 4303, "A
Donor´s Guide to Car Donation".
IRS Tax Regulations
April 2007
Vehicle Donations
If you donate a qualified vehicle to charity and claim a value of more than $500, you will not be allowed to take a charitable deduction unless you get a contemporaneous (usually within 30 days) written acknowledgement of the contribution from the charitable organization and include the acknowledgement with your tax return. Also, the amount you can deduct is contingent upon the charitable organization's usage of the donated vehicle. If the charitable organization sells the donated vehicle without having made material modifications to it or without having significantly used the vehicle for charitable purposes, generally your charitable deduction cannot be greater than the amount the organization received from the sale of the vehicle. Otherwise, you can deduct the fair market value. For this purpose, qualified vehicles include motor vehicles, boats, and aircraft.
IRS Publication 4303, A Donor's Guide to Car Donations, provides general IRS guidelines on car donations.
2007 IRS Form 1098-C - This is the tax forum you will need.
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