Is a Vehicle Donation Tax Deductible?

By Anton Behr

  • Overview

    Tax deductible vehicle donation laws have recently been altered by the IRS. Presently, a vehicle donation can still be deducted tax-wise, though the laws concerning this type of deduction are a bit tougher than they used to be. Before donating your vehicle, consider the following information.
  • Changes

    A few years ago, the IRS allowed anyone donating a vehicle to deduct the "fair market value" of that vehicle during tax time. However, many people began deducting the "suggested retail price" of the vehicle, which resulted in millions of lost government dollars. Thus, the IRS altered the vehicle donation laws in order to curb this massive deduction spree. Today, if the vehicle that you intend to donate is worth more than $500, then the only amount that can be deducted is the "selling price" of that vehicle.
  • Claim

    In order to gain a tax-deduction for a donated vehicle, the charity must provide a statement of sale within 30 days of accepting the donation. At this point, the statement of sale must be attached to the proper tax return form in order to gain a tax deduction. A donor is not entitled to learn the sale amount prior to donating a vehicle. Of course, this leaves many donors wary resulting in lots of lost vehicles for charities everywhere. However, there is still one way to deduct the fair market value of a donated vehicle.

  • Charitable Use

    If a charity uses a donated car to further their purpose, then the full fair market value of the car can be deducted. For example: if you donate a used vehicle to a charity, and that charity uses the car to attend to their own charitable duties, then that car can be fully deducted at fair market value. Note that the "fair market value" in this instance must be determined by the donor. Further, this estimate must come from the current "Blue Book" value. There are various organizations set up across the United States that accept used cars for this specific purpose.
  • Warning

    While donating a car may seem like a good idea, you cannot deduct any amount unless you itemize your taxes. In addition, you will have to consider other factors such as your income, deduction needs, and the overall value of the car itself. The best way to determine if these deductions can apply to you is to contact a qualified accountant. Or, you can contact the IRS for further information. In this instance, it is not advised that you try and deduct a donated vehicle on your own.
  • Deciding to Donate

    If you have a vehicle that you'd like to get rid of, there are a couple different ways to do so. You can donate your car to a charity; sell the car on your own; or trade your car in for a newer car. If you decide to donate your car, take a good look at the revised tax laws. The IRS has listed all of this information on their website. In addition, a certified accountant will be able to provide you with enough information to make the right decision. In the end, a charitable donation is always a positive thing, though it may not help your taxes.
  • © High Speed Ventures 2011