Donations to charity are tax deductible and can reduce your taxable income. If you donated a vehicle to charity you may want to review the IRS Publication “A Donor’s Guide to Vehicle Donations” IRS Publication 4303 (Rev. 1-2015). This Publication provides important information you will want to consider if you are planning to claim a vehicle donation as a charitable deduction.
According to the IRS there are 3 things you should consider regarding your charitable vehicle donation:
Q: Is The Charity Of My Choice A Qualifying Charity?
A: “The most common types of qualified organizations are section 501(c)(3) organizations such as charitable, educational, or religious organizations.” To verify that an organization is a qualified charity you can use the EO Select Check tool on the IRS website. It is important to note that “Not all qualified organizations are listed in EO Select Check which can be found at http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check. Please note churches, synagogues, temples, and mosques are not required to apply to the IRS for recognition of exemption in order to be qualified organizations and are frequently not listed.” If you have questions regarding a charity you can call the IRS Customer Account Services division for Tax Exempt and Government Entities at (877) 829-5500 (toll-free). Be sure to have the charity’s correct name and address when you call.
Q: How Do I Determine The Amount I Can Deduct For My Vehicle Donation?
A: Vehicles sold for over $500: “If the charity sells your vehicle for over $500, your deduction is limited to the gross proceeds the charity receives from its sale. The charity should provide you with a Written Acknowledgement for Vehicle Contribution or an IRS Form 1098-C, Contribution of Motor Vehicles, Boats, and Airplanes, as acknowledgment. The Written Acknowledgement or IRS Form 1098-C should contain the following information:
- Your name and taxpayer identification number,
- The vehicle identification number
- The date of the contribution, and one of the following:
- A statement that no goods or services were provided by the charity in return for the donation, if that was the case,
- A description and good faith estimate of the value of goods or services, if any, that the charity provided in return for the donation, or
- A statement that goods or services provided by the charity consisted entirely of intangible religious benefits, if that was the case.
- A statement certifying that the vehicle was sold in an arm’s length transaction between unrelated parties,
- The date the vehicle was sold,
- The gross proceeds received from the sale, and
- A statement that your deduction may not exceed the gross proceeds from the sale.
Note: If the acknowledgement does not contain all required information the deduction may not exceed $500.
Vehicles sold for under $500: If you are claiming a deduction of $500 or less, you will need to determine your vehicle’s fair market value as of the date of the contribution. Generally, fair market value is the price a willing buyer would pay and a willing seller would accept for the vehicle, when neither party is compelled to buy or sell, and both parties have reasonable knowledge of the relevant facts.
If you are using a vehicle pricing guide to determine fair market value, be sure that the sales price listed is for a vehicle that is the same make, model, and year, sold in the same condition, and with the same or substantially similar options or accessories, as your vehicle. Moreover, the fair market value of a vehicle cannot exceed the price listed for a private-party sale.” IRS Publication 4303 (Rev. 1-2015).
Q: What Are My Responsibilities As A Donor?
A: For the IRS you will need to record certain information about the donation including the name and address of the charity you donated to, date of donation, place where donated and a description of the vehicle.
IRS Publication 4303 (Rev. 1-2015) states “You must attach to your return the written acknowledgement received from the charity if you are deducting more than $500. Depending on the amount you are claiming as a charitable contribution deduction, you may need to get and keep certain records and file an additional form or statement to substantiate your charitable contributions.”
Form 8283, Noncash Charitable Contributions-
“If the deduction you are claiming for a donated vehicle is greater than $500, but not more than $5000, you must complete Section A of form 8283 and attach it to your Form 1040.
If the deduction you are claiming for a donated vehicle is greater than $5,000, you must complete Section B of Form 8283, which must include the signature of an authorized official of the charity, and attach it to your return.”
For more information you may want to consult with your tax advisor. You can view the IRS Publication 4303 “A Donor’s Guide to Vehicle Donation” at http://www.irs.gov/pub/irs-pdf/p4303.pdf.