Car Donation Tax Updates

IRS Tax Tips

June 4, 2008

For those who’ve made a charitable car donation in the year 2008 and wish to deduct it for their taxes, take note! You must avail yourself of the IRS rules & regulations that apply to your car donation.

Firstly you must itemize your deductions in order to deduct a charitable donation. In this case you would use a Schedule A, Form 1040.

How much can I deduct?

That depends on many factors. Foremost is what the charity does with the vehicle. That will have a large impact on how you can deduct the donation.

Upon receipt of a vehicle almost all charities will sell the vehicle and use a portion of the proceeds for funding their charitable activities.

In this situation the amount that the vehicle sells for determines how much the donor can deduct. However, if the vehicle sells for $500 or less you can only deduct the actual fair market value up to, but not exceeding, $500.

For tax deductions greater than $500, a Form 828 -, Noncash Charitable Contributions, must be attached to the tax return.

Fair Market Value

There are only a few circumstances where you can deduct the vehicle's fair market value, as opposed to the amount it sold for. The following are those circumstances:

* The organization makes significant intervening use of or materially improves the vehicle

* The organization gives or sells the vehicle to a needy individual at a price significantly below fair market value in direct furtherance of its charitable purpose of relieving the poor and distressed or underprivileged who are in need of a means of transportation

* NOTE: Very few charities actually do the above two points, and in our research, we have found that the few that claim they do this only do so in a VERY small percentage of cases. And the donor does not seem to have any say over whether they do or not.

* The claimed deduction is $500 or less