If you donated a car to a qualified charitable organization in 2017, and intend to claim a deduction, you should be aware of the special rules that apply to vehicle donations.

Note: You can deduct contributions to a charity only if you itemize deductions using Schedule A of Form 1040.

Charities typically sell donated vehicles. If the vehicle is sold by the charitable organization to which you donated it, the deduction claimed by the donor (you) usually cannot exceed the gross proceeds from the sale.

However, the taxpayer can generally deduct the vehicle’s fair market value (FMV), even if it exceeds the gross proceeds from the sale of the vehicle, if any of the following are true:

  • The charitable organization makes a significant intervening use of the vehicle, such as using it to deliver meals on wheels.
  • The charitable organization donates or sells the vehicle to a needy individual at a significantly below-market price, if the transfer furthers the charitable purpose of helping a poor person in need of a means of transportation.
  • The charitable organization makes a material improvement to the vehicle, i.e., major repairs that significantly increase its value and not mere painting or cleaning.

If none of the above criteria are met, and the donated vehicle sells for less than $500, you can claim the lesser of the FMV of your vehicle or the amount for which it is sold.

If the donated vehicle sells for more than $500, and your deduction is $500 or more you must obtain written, contemporaneous (timely) acknowledgment of the donation from the charitable organization. You must also attach Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, to your tax return.

Form 1098-C generally serves as the written acknowledgment. It must include 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.

Note: If there is no written acknowledgment, or if it does not contain all of the required information, your charitable contribution deduction may be disallowed.

For more information about donating a car to charity please contact our office.

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