Car Donation Guidelines
A potential tax deduction can be an important consideration if you choose to donate a vehicle to a charity. Before making such a donation, a taxpayer is wise to do three things: consult the Internal Revenue Service Publication 4303 titled "A Donor's Guide to Vehicle Donations," follow a few important steps and get individual tax advice from a qualified tax adviser.
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Check out the Charity
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For purposes of tax deductions, the charity needs to be a qualified organization. Most qualified organizations are section 501(c)(3) organizations. These usually include educational, charitable or religious organizations. One way to verify whether the organization is a qualifying one is to consult IRS Publication 78, "Cumulative List of Organizations." IRS publications are commonly available online at IRS.gov and through many public libraries. Vehicle donors, if they know the correct name and address of the charity to which they wish to donate a vehicle, can telephone the IRS Customer Account Services division for Tax Exempt and Government Entities toll free at 877-829-5500.
Value of Your Vehicle
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Fair market value may be based on commonly used industry vehicle pricing guides. Determining fair market value assumes all parties know all the relevant facts including model, make, condition, year, options, and that the seller is willing to accept a price and the buyer is willing to pay the price in a private party sale. For a motor vehicle to qualify, it must meet certain standards including having been manufactured to be driven on public thoroughfares. In general, the deduction amount a vehicle you donate will depend on the way in which the charity uses the vehicle as that use is reported in a written acknowledgment the charity provides to you. Often charities sell vehicles that are donated. Usually, but with exceptions, the amount you can deduct is limited and does not exceed the sale gross proceeds that the charity received.
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Laws on Liability
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States, not the federal government, regulate vehicle title and registration. Almost invariably, states recommend that vehicle donors assume responsibility for the transfer of the vehicle's title. In this way, the donor ensures that he terminates his liability for anything that happens to or involves the vehicle. In many states, the filing of a form with the state's motor vehicle division or department is the formal requirement. The form states that the vehicle has been given as a donation. Unless the donor's state law requires that license plates be left attached, the donor is usually advised to remove license plates. The charity may require that the donor provide the title to the vehicle. In some states, if the donor does not have a copy of the title, he can apply for a replacement title prior to donations.
Tax Adviser
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Certain limitations and restrictions apply to car donations. As just one example, a taxpayer's deduction may not exceed 50 percent of the taxpayer's adjusted gross income. Additionally, the IRS requires specific record keeping on the part of the taxpayer regarding donation of vehicles. The information provided here is not and should not be construed as tax advice. For specific answers to questions about car donations, check with your qualified tax adviser.
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