Donate a Vehicle - Knowing the IRS Requirements
When you donate a vehicle, the IRS has rules in place to govern how much of a deduction you can take. There are a couple of ways that a charity uses automobile donations. Some sell the cars off and take the profits to use for their work. Others keep the car and use them for either the charity's use or give them to someone that needs a car and cannot afford one on their own. The IRS rules for these scenarios are very different and will directly affect the amount of deduction you will see when you donate.
Let's take the first situation for when you donate a vehicle. Some charities accept vehicles, then turn around, and sell them. A few of them sell the cars directly themselves. Many others use intermediaries to handle the sales. In most cases, the cars go for only a few hundred dollars at most. In some cases, the car might go for more if it is newer or a desired model. If it is more than the couple hundred dollars, you need a letter from the charity showing how much they got out of the sale of the vehicle. That is the maximum amount you can claim on your tax return.
Let's take the second situation for when you donate a vehicle. Some charities use the vehicles for their own use. Many offer free transportation to people between clinics or other agencies to assist them. Others do pick-ups of donations in a donated truck. Any legitimate use of the vehicle by the charity changes how the IRS views the donation. In this case, the donor can take the fair market value of the vehicle as their tax deduction. However, the IRS heavily scrutinizes this form of donation so make sure you have full documentation from the charity.
The second situation comes with another ending. Many charities let you donate a vehicle, then turn around, and give it to a person in need. The person must be someone who needs a vehicle but cannot afford to purchase one on his or her own. The charity should provide full documentation of this when you make the donation. This documentation allows you to take the full market value at tax return time. In the second situation, if the fair market value of the vehicle is higher than $5000 you need to get an independent appraisal of value to verify its fair market value.
