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4 Tips for Donating Cars or (Boats and Airplanes)
The Most Important Rule is to Check Out the Charity
To verify that an organization is a charity qualified to receive tax deductible contributions, see IRS Publication 78 cumulative List of Organizations, an annual list of most charities. Publication 78 is available online at http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check.Not all qualified organizations are listed in Publication 78. For example, churches, synagogues, temples, and mosques are not required to apply to the IRS for recognition of exemption in order to be qualified organizations and are frequently not listed. If you have questions, call the IRS Customer Account Services division for Tax Exempt and Government Entities at (877) 829-5500
See If You Will Get a Tax Benefit.
You can deduct contributions to charity only if you itemize deductions on your Schedule A of Form 1040 and the vehicle is qualified. A qualified vehicle is: A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways, a boat, or an airplane.
Check the Value of Your Car or Qualifying Vehicle.
The maximum amount you can deduct on your income tax return is the fair market value of your car. Fair market value is the price a willing buyer would pay and a willing seller would accept for the car.
See What Your Record Keeping and Filing Responsibilities are
Deduction $500 or less. – If the qualified organization sells the vehicle for $500 or less you can deduct the smaller of: $500 or the vehicle’s fair market value on the date of the contribution. If the vehicle’s fair market value is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging your donation.
Deduction more than $500 – If you donate a qualified vehicle with a claimed fair market value of more than $500 you must receive a 1098-C from the charity to claim a deduction. If the deduction is greater than $5,000 you must have a qualified appraisal. You can deduct the smaller of:
The gross proceeds from the sale of the vehicle by the organization, or the vehicle’s fair market value on the date of the contribution. As an example Edna donates her old Edsel to a charity. She had determined the fair market value of the auto was $2,500 but the charity sold her vehicle at auction for $2,200. The amount she can claim is $2,200 even though the FMV was $2,500.
When a tax return is filed if the deduction is more than $500, you must:
Attach Copy B of Form 1098-C to Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, and mail the forms to the IRS, or
Include Copy B of Form 1098-C as a pdf attachment if your software program allows it.
If you do not attach Form 1098-C (or other statement), you cannot deduct your contribution.
There are two exceptions to the rules just described for deductions of more than $500. The Form 1098-C (or other statement) will show if either exception applies.
Exception 1– Vehicle used or improved by organization. If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle’s fair market value at the time of the contribution. But if the vehicle’s fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount
Exception 2 – Vehicle given or sold to needy individual. If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization’s charitable purpose, you generally can deduct the vehicle’s fair market value at the time of the contribution. But if the vehicle’s fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount.