Selecting a Charity
If you are eligible to deduct charitable contributions for federal income tax purposes (see
Qualifying for a Tax Deduction, below) and you want to claim a deduction for donating yourvehicle to charity, then you should make certain that the charity is a qualified organization.Otherwise, your donation will not be tax deductible. The most common types of qualifiedorganizations are section 501(c)(3) organizations, such as charitable, educational, or religiousorganizations. This publication refers to section 501(c)(3) organizations generally as “charities.”To verify that an organization is a charity qualified to receive tax-deductible contributions,use the “EO Select Check” tool on the IRS website, http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check. You may also verify an organization’s status by callingthe 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. It is also helpful to knowthe charity’s address.Not all qualified organizations are listed in EO Select Check (Pub.78 data). For example, churches,synagogues, temples, and mosques are not required to apply to the IRS for recognition of exemptionin order to be qualified organizations and are frequently not listed. If you have questions, callCustomer Account Services at the above number.
If you want to learn more about a charity before donating your vehicle, use the resources listedunder Assistance Through the Charity, Through State Officials, and Through the IRS on page 8.
Qualifying for a Tax Deduction
You can deduct contributions to charity only if you itemize deductions on your Schedule Aof Form 1040.You must take into account certain limitations on charitable contribution deductions. Forexample, your deduction cannot exceed 50% of your adjusted gross income. Other limitationsmay apply. Publication 526, Charitable Contributions, provides detailed information on claimingdeductions and the deduction limits. It also describes the types of organizations that are qualifiedto receive tax-deductible contributions. Publication 526 is available online at www.irs.gov or bycalling (800) 829-3676 (toll-free).
Determining the Amount You Can Deduct
The following rules on deductibility apply to donations of qualified vehicles. A qualified vehicleis any motor vehicle manufactured primarily for use on public streets, roads, and highways; aboat; or an airplane. However, a vehicle held by you primarily for sale to customers, such asinventory of a vehicle dealer, is not a qualified vehicle. If you donated a non-qualified vehicle, seePublication 526 for the rules and limits that apply to property donations.
The amount you may deduct for a vehicle contribution depends upon what the charity does withthe vehicle as reported in the written acknowledgment you receive from the charity. Charitiestypically sell the vehicles that are donated to them. If the charity sells the vehicle, generally yourdeduction is limited to the gross proceeds from the sale. However, there are certain exceptions,described below.
Written Acknowledgment for Vehicle Contribution Deduction of More Than $500,
What the written acknowledgment must contain depends upon what the charity does with the
vehicle. However, all acknowledgments must 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.
Note: If the acknowledgment does not contain all required information, the deduction may not
exceed $500.
Gross Proceeds Limit Applies — Generally, if the charity sells your vehicle, your deduction
is limited to the gross proceeds the charity receives from its sale. In addition to the information
indicated above, the contemporaneous written acknowledgment must contain:
■ 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.
Exceptions to Gross Proceeds Limit — Generally, if one of the following applies, you may beeligible to deduct your vehicle’s fair market value on the date you donated it.
■ The acknowledgment contains a statement certifying that the charity intends to make a significantintervening use of the vehicle, a detailed description of the intended use, the duration ofthat use, and a certification that the vehicle will not be sold before completion of the use.
■ The acknowledgment contains a statement certifying that the charity intends to make a materialimprovement to the vehicle, a detailed description of the intended material improvement and acertification that the vehicle will not be sold before completion of the improvement.
■ The acknowledgment contains a statement certifying that the charity intends to give or sellthe vehicle to a needy individual at a price significantly below fair market value and that thegift or sale is in direct furtherance of the charity’s charitable purpose of relieving the poor anddistressed or the underprivileged who are in need of a means of transportation. This exceptionwill not apply if the charity merely applies the proceeds from the sale of the vehicle to a needyindividual for any charitable purpose.
■ A special rule applies if the acknowledgment indicates that the donated vehicle sold for $500or less. In this case, you may claim a deduction for the lesser of the vehicle’s fair market valueon the date of the contribution, or $500, provided you get a written acknowledgment from thecharity that complies with the requirements described under Written Acknowledgment for aVehicle Contribution Deduction of $500 or Less, page 5.
EXAMPLE 1: On April 1, you donated your car to the local food bank. When you donated
the car, you had determined that the fair market value was $4,300. On November 10, the charitysold your car (to someone other than a needy individual), without any significant interveninguse or material improvement, and received gross proceeds of $3,700. Your deduction maynot exceed $3,700.
EXAMPLE 2: The charity certifies in an acknowledgment that it will make significant interveninguse of the vehicle by using it daily for at least a year to deliver food to needy individuals. Yourdeduction may not exceed the fair market value of your car, $4,300.
EXAMPLE 3: The facts are the same as in Example 1 except the charity only received grossproceeds of $400 from the sale. Your deduction may not exceed $500.
Time and Manner of Providing Acknowledgment — You must obtain the written
acknowledgment from the charity within 30 days from the date of the vehicle’s sale,
or if an exception applies, within 30 days of the date of the donation.
The charity may use Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, asacknowledgment or provide its own statement containing the information described above. Besure to attach the acknowledgment and Form 8283, Noncash Charitable Contributions (see
below), to your return.
Written Acknowledgment for a Vehicle Contribution Deduction of $500 or Less,
If you are claiming at least $250 but not more than $500 as the value of your vehicle, the acknowledgment
must include the name of the charity, a description (but not value) of your vehicle, and
one of the following:
■ a statement that no goods or services were provided by the charity in return for the donation, ifthat was the case,
■ a description and good faith estimate of the value of goods or services, if any, that the charityprovided 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.
Time and Manner of Providing Acknowledgment — You must obtain the written acknowledgmenton or before the earlier of the date you file your return for the year you donated the vehicle, or thedue date, including extensions, for filing the return. A charity can provide you with a paper copyof the acknowledgment, or it can provide the acknowledgment electronically, such as via an emailaddressed to you. Do not attach the acknowledgment to your income tax return; instead, retain itwith your records to substantiate your donation.
Determining the Fair Market Value of Your Vehicle
If an exception to the gross proceeds limit applies to your deduction or if you are claiming adeduction of $500 or less, you will need to determine your vehicle’s fair market value as of thedate of the contribution. Generally, fair market value is the price a willing buyer would pay and awilling seller would accept for the vehicle, when neither party is compelled to buy or sell, andboth parties have reasonable knowledge of the relevant facts.
If you use a vehicle pricing guide to determine fair market value, be sure that the sales pricelisted is for a vehicle that is the same make, model, and year, sold in the same condition, andwith the same or substantially similar options or accessories, as your vehicle. Moreover, thefair market value of a vehicle cannot exceed the price listed for a private-party sale.
EXAMPLE: You donate your car to a local charity that provides you with an acknowledgmentcertifying that it intends to make a significant intervening use of the car. Your credit unionrepresentative told you that the price listed for a private-party sale in a vehicle pricing guidecould be as high as $1,600. However, your car needs extensive repairs, and after some checking,you find that you could only sell your car for $750. $750 is the fair market value of the car.
For more information on determining the value of your vehicle, see Publication 561, Determining the
Value of Donated Property.
Recordkeeping and Filing Requirements
You must attach to your return the written acknowledgment received from the charity if youare deducting more than $500. Depending on the amount you are claiming as a charitablecontribution deduction, you may need to get and keep certain records and file an additionalform or statement to substantiate your charitable contributions. See the chart Recordkeepingand Filing Requirements on page 7.
Form 8283, Noncash Charitable Contributions
If the deduction you are claiming for a donated vehicle is greater than $500, but not morethan $5,000, you must complete Section A of Form 8283 and attach it to your Form 1040.If the deduction you are claiming is greater than $5,000, you must complete Section B of Form8283, which must include the signature of an authorized official of the charity, and attach it to yourreturn. In addition, if the deduction is over $5,000 and not limited to the gross proceeds from thesale of your vehicle, you must get a written appraisal of your vehicle (see Written Appraisal, below).
Written Appraisal
Your written appraisal must be from a qualified appraiser. See Publication 561, Determiningthe Value of Donated Property. The appraisal must be made no more than 60 days before youdonate the vehicle. You must receive the appraisal before the due date (including extensions) ofthe return on which you first claim a deduction for the vehicle. For a deduction first claimed onan amended return, the appraisal must be received before the date the amended return is filed.When you file your income tax return (Form 1040 or Form 1040X), you will need to completeSection B of Form 8283, and attach it to your return.If Section B is required and the charity sells or otherwise disposes of a vehicle within three yearsafter the date of receipt, the charity must file Form 8282, Donee Information Return, with the IRS.On Form 8282, the charity reports information identifying the donor and itself, and the amount itreceived upon sale or other disposition of the vehicle. The charity must provide you with a copy
of the form.The chart on page 7 lists recordkeeping and filing requirements, based on the amount you claimas a deduction.
Definitions
Below are definitions of material improvement and significant intervening use as they apply to
vehicle donations.
■ Material improvement includes a major repair or improvement that results in a significantincrease in the vehicle’s value. Cleaning, minor repairs, and routine maintenance are notmaterial improvements. In addition, a material improvement to the vehicle will not qualify ifthe donor funded the improvement by giving the charity an additional payment.
■ Significant intervening use means that a charity must actually use the vehicle to substantiallyfurther its regularly conducted activities, and the use must be considerable. There is no significantintervening use if the charity’s use is incidental or not intended at the time of the donation.
State Law Rules on Liability — Vehicle Title
Generally, state charity officials recommend that the donor take responsibility for transfer of titleto ensure termination of liability for the vehicle. In most states, this involves filing a form with thestate motor vehicle department which states that the vehicle has been donated. Before donatingthe vehicle, you should remove the license plates, unless state law requires otherwise. This mayhelp you avoid any liability problems after the vehicle is transferred.
Assistance Through the Charity, Through State Officials, and Through the IRS
Charity Assistance
A charity must make available for public inspection its application for tax exemption, its
determination letter, and its most recent annual information returns (Forms 990). A charityalso must provide copies of these documents upon request (unless it makes the documentswidely available). A charity may not charge you for inspecting the documents, but it maycharge a reasonable fee for copying and mailing the documents.
Note: Certain charities, including churches, synagogues, and mosques, are not required to fileexemption applications and annual information returns.
State Charity Official Assistance
Many states require charities that solicit contributions to register and file certain documents witha state charity regulator, such as the state attorney general or the secretary of state. Most charitiesmust file in their state of incorporation and in other states where they have activities. Many of thestate charity officials provide useful information about charities and fundraisers on Web sites and
in brochures and publications.A listing of state charity offices is available through the National Association of State CharityOfficials at www.nasconet.org. A listing of state attorneys general is available through theNational Association of Attorneys General at www.naag.org.Contact your state charity official if you have a concern or complaint that a charity or fundraiseris not complying with state laws.
IRS Assistance
The IRS can answer your tax questions and can provide tax forms, publications, and otherreading materials for further assistance. IRS materials are accessible through the Internet atwww.irs.gov, through telephone ordering at (800) 829-3676, and at IRS walk-in offices in manyareas across the country. The IRS also must make available the charity’s application for taxexemption, determination letter, and Form 990.
If you have a concern or complaint about a charity, write to:
IRS Examination Division ,
Attn: T:EO:E, MC 4910 DAL ,
1100 Commerce Street ,
Dallas, TX 75242,
donation of vehicles, donation of vehicles for tax deduction, donation of vehicles to charity
Source: http://docphy.com/hobbies-activities/politics-social-issues/charity-causes/donors-guide-vehicle-donation.html
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