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IRS Car Donation and Tax Information
TO BENEFIT FROM THE TAX WRITE-OFF YOU MUST
ITEMIZE YOUR DEDUCTIONS
In January 2005, a new IRS tax code went into effect which eliminates
the guesswork in determining the value of your donated car, truck, RV, boat,other
vehicle, or asset. The code addresses two important values: Actual Value, and Fair Market Value. There can be
a difference.
ACTUAL VALUE
Under the new IRS code, you may deduct the full price received for the sale of your car or other vehicle.
This greatly simplifies the process for donors who no longer have to research and determine an estimate of the fair market
value of the vehicle. This also eliminates the risk of you getting into trouble by overstating the value of your deduction
on your tax return. You’ll know exactly the amount you may deduct, eliminating guesswork.
The IRS allows you to claim a tax deduction of
- a) The value of your vehicle up to $500 without a
receipt of sale or
- b) If we sell the vehicle for more than $500, we
will mail you a notification stating the exact amount for which it sold, which is the value you state for your tax purposes.
Example. You donate your car to a local high school for use by their students studying automobile
repair. Your credit union told you that the "blue book" value of the car is $1,600. However, your car needs extensive repairs
and, after some checking, you find that you could sell it for for $750. You can deduct $750, the true fair market value of
the car, as a charitable contribution.
In any case...
You will be able to claim a deduction for the value of your vehicle up to $500 with a simple receipt from
the charity you donate the vehicle to stating that the vehicle was donated.
If your donated car sells for more than $500, then you will receive a second receipt from the car donation
charity with the sale value of your vehicle. The charity must provide this receipt with 30 days of the sale of your vehicle.
You can claim the full sale value of your car donation.
No charity can predict what a vehicle will sell for at the time of sale/auction -- but they can often give
you a ball-park idea of what to expect. There are no guarantees, though, for what any particular vehicle will sell for when
it goes on sale on the auction lot -- but generally newer vehicles (within 7 years of age), luxury cars, SUVs and pickup trucks
will bring a good price at auction, even if the vehicle has been in an accident.
FAIR MARKET VALUE
In some cases the fair market value for certain vehicles
may be taken. For example, late model cars or vans that end up being used to further the work of our charity OR vehicles on
which we make a significant material improvement such as a major repair, before selling it.
*
Excerpt from IRS publication 4302, A Charity’s Guide to Car Donations:
If
a charity intends to make significant intervening use of or materially improve the car, the donor generally can deduct its
fair market value.
“Significant intervening use means that a charity must actually use the car to substantially
further its regularly conducted activities, and the use must be considerable. There is no significant intervening use if the
charity’s use is incidental or not intended at the time of the contribution.
Material improvement includes a
major repair or improvement that results in a significant increase in the car’s value. Cleaning, minor repairs, and
routine maintenance are not material improvements.
The charity must provide the donor with a contemporaneous written
acknowledgement of the donation. Without an acknowledgement, the donor cannot deduct the contribution.”
(end
of excerpt from IRS publication 4302, A Charity’s Guide to Car Donations)
Fair market value is the price at which property would change hands between a
willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant
facts.
Determining
Fair Market Value
If you contribute a
car, boat, or any non-cash asset to a charitable organization,
YOU -- not the charity -- must
determine the asset's fair market value,
for it is considered a "conflict
of interest" were the charity to do so.
This publication is designed to help donors and appraisers
determine the value of non-cash property that is given to qualified organizations http://www.irs.gov/pub/irs-pdf/p561.pdf. It also explains what kind of information you must have to support the charitable contribution deduction you claim on your
return.
More information about determining the
"fair market value" of a vehicle can be found in "Publication 526 Charitable Contributions" at http://www.irs.gov/pub/irs-pdf/p526.pdf. You should read the entire publication. Be sure
to read the section entitled "Contribution of Property" and a section called "Determining Fair Market Value." Another section
called "Cars, boats, and aircraft" will help you in situations of donating these types of properties.
If you claim a deduction on your return of over $500 for all
contributed property, you must attach a Form 8283 (PDF), Noncash Charitable Contributions, to your return http://www.irs.gov/pub/irs-pdf/f8283.pdf. If you claim a total deduction of $5,000 or less for all contributed property, you need only complete Section A of Form
8283. If you claim a deduction of more than $5,000 for an item or group of similar items, you need to complete Section B of
Form 8283, which requires a qualified appraisal by a qualified appraiser
TAX INFORMATION FROM THE IRS
The IRS requires that the charity or donation
program verify your donation and file IRS Form 8282:Donee Information Return. You will be sent a copy for your records.
RECORDS YOU MUST OBTAIN
FROM THE CHARITY
When you make any non-cash contributions greater
than $250, you must get and keep a receipt from the charitable organization showing: Name of the charity, date, location of
the charitable contribution, a detailed description of the donation,and a statement of whether the charity provided any goods
or services in return for the car and, if so, a description and estimate of the fair market value of the goods or services.
This receipt also includes the charity's tax identification number for your records.
Commercial firms and trade organizations publish guides, commonly called "blue books," containing complete
dealer sale prices or dealer average prices for recent model years. The guides may be published monthly or seasonally, and
for different regions of the country. These guides also provide estimates for adjusting for unusual equipment, unusual mileage,
and physical condition. The prices are not "official" and these publications are not considered an appraisal of
any specific donated property. But they do provide clues for making an appraisal and suggest relative prices for comparison
with current sales and offerings in your area. VISIT LINKS - TOP RIGHT COLUMN
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The Tax Deductible Donation Forum
Commercial firms and trade organizations publish guides, commonly called "blue
books," containing complete dealer sale prices or dealer average prices for recent model years. The guides may be published
monthly or seasonally, and for different regions of the country. These guides also provide estimates for adjusting for unusual
equipment, unusual mileage, and physical condition.
The prices are not "official" and these publications are not
considered an appraisal of any specific donated property. But they do provide clues for making an appraisal and suggest relative
prices for comparison with current sales and offerings in your area. VISIT LINKS - TOP RIGHT COLUMN
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If you donate a car to a charitable organization,
YOU must determine its fair market value. The fair market value of your vehicle
cannot be determined by a charity, the IRS considers that to be a "conflict of interest." Kelley Blue Book
can help you determine your vehicle's value.
Start by logging on to http://www.kbb.com.
Click on
“Used cars” at top
Select
the year, make and exact model of your vehicle, then
Press “GO”.
Select "Private Party Value."
You also need to fill in the exact mileage
on the car and the zip code in which you will be stating that you live on your tax return.
To help
further define your specific vehicle's value, make sure you accurately select the options on your vehicle. These could include
a sunroof, leather interior, power windows and door locks, etc. Check these boxes correctly according to your car and check
all that apply.
The bottom box is entitled "Select Vehicle Condition." Choose "Help Me,"
which is the last box on the right. This is important in order to accurately get what the IRS deems as the "fair market value"
for your vehicle.
After choosing "Help Me" click on the bottom button called, "Get Pricing
Report."
On this page you rate the following: Exterior
Condition, Interior Condition,
Mechanical Condition, and other important factors in rating your vehicles current
condition. Choose one rating for each. Do not skip any of these questions. Print this page to show the charity
and the IRS that you took the vehicle's current condition into consideration when placing a value on it.
When finished,
click on "Get Pricing Report" at the bottom of the page. You will then receive the Kelley Blue Book "Private
Party Value" for your car in its current condition. This will be the value you will use for your donated vehicle. You should
print a few copies of this page for your tax records, the IRS and for the charity in which you are donating your vehicle.
Make sure to take several photos of your vehicle for your files as well.
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