Deducting Vehicle Donations Tips

If you donated a car or other vehicle to a qualified charitable organization in 2008 and intend to claim a deduction you should review the special rules that apply to vehicle donations. You can deduct contributions to a charity only if you itemize deductions on Schedule A of Form 1040.

Generally, the amount you may deduct for a vehicle contribution depends upon what the charity does with the vehicle. Charities typically sell donated vehicles. If the vehicle is sold by the charitable organization, the deduction claimed by the donor usually may not exceed the gross proceeds from the sale.

If your deduction is $250 or more you must obtain written acknowledgment of the donation from the charity. If your deduction is more than $500, this written acknowledgment or Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, must be attached to your return. Among other things, the acknowledgment generally must include the gross proceeds of the sale, the vehicle identification number, and a statement certifying the vehicle was sold in an arm's length transaction between unrelated parties.

The taxpayer can generally deduct the vehicle's Fair Market Value (FMV), if:

The organization makes significant intervening use of or materially improves the vehicle

The organization gives or sells the vehicle to a needy individual at a price significantly below FMV in direct furtherance of its charitable purpose of relieving the poor and distressed or underprivileged who are in need of a means of transportation

The claimed deduction is $500 or less

The vehicle's Fair Market Value cannot exceed the private party sales price listed in a used vehicle pricing guide.

If the organization intends to make significant intervening use of the vehicle or material improvements to the vehicle, the acknowledgment must include certain certifications. If the organization intends to sell the vehicle to a needy individual at a price significantly below FMV, or gratuitously transfers the vehicle to a needy individual, the acknowledgment must also include certain certifications.

IRS Publication 526, Charitable Contributions.