IRS Rules for Car Donation
Donating old cars and other vehicles to charitable and non-profit organizations is a popular way of giving and it is accepted as tax deductible by the Internal Revenue Service (IRS). There are hundreds of national, state and local organizations like the National Kidney Foundation and the Glaucoma Research Fund that rely on car donations to help fund their work. In order to qualify for the tax deduction, you must follow the IRS rules for car donations. Those rules changed in 2005, so if you haven't donated a vehicle recently or it's your first time, make sure you know what to do.
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Identification
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The IRS recognizes donations of cars, other motorized vehicles, boats and aircraft as long as the receiving organization is considered qualified. You must itemize deductions, and you have to document the contribution in accordance with IRS rules for car donations. If you need help, you can call the IRS Tax Exempt/Government Entities Customer Service toll free at 1-877-829-5500 or get information online (links below).
Types
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For a vehicle donation to be tax deductible, the organization must be qualified to receive donations. The IRS maintains a searchable list of qualified organizations, Publication 78 (link below). Some government-affiliated agencies as well as churches, mosques, synagogues, and temples are not required to register and may not be listed in Publication 78 but are qualified recipients. If you are unsure or suspicious about an organization the IRS suggests you contact your state charity officials or attorney general (the IRS has listings and links to these officials online).
Size
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IRS rules for car donations allow you to deduct the gross proceeds once the organization has sold the vehicle. You can deduct fair market value only if the vehicle is sold for less tan $500. In tat case, you may deduct market value up to $499. The receiving organization is required to send you documentation of the sale price within 30 days of the sale.
Exceptions
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There are two exceptions that may allow you to use fair market value to calculate the size of your tax deduction. The first is if the charity/nonprofit keeps the vehicle for use. The other is if they make substantial repairs/improvements. In either case you can use fair market value and the organization is required to send you the proper documentation within 30 days.
Documentation
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For a tax deduction to be allowable it must be properly documented. Normally all you will need is the paperwork (including the sale price) the receiving organization provides. However, if the vehicle donation falls under the rules that allow you to use fair market value, you will need to calculate this. You'll need to take into account the condition and special features and accessories. Instructions are available in IRS Publications 526 (Charitable Deductions) and 561 (Determining the Value of Donated Property). You can also call the IRS for help with tax questions at 1-800-829-1040.
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