In 2004, the IRS changed its rules for claiming a donated vehicle as a tax deduction. Prior to those changes, a car donor could simply donate a car and claim the estimated fair market value. The new laws which went into effect in 2004 were designed to ensure that donors claim a tax deduction for the actual amount the charity received for the sale of their donated car. So, if a donated car sells at auction for $2000, that is what the donor was allowed to claim as a deduction.
There are exceptions to this rule, however, and we are often asked by potential donors, especially of newer models and higher end vehicles, what the rules are that would allow them to claim fair market value for their car donations. These exceptions are listed by the IRS as:
- If the charity intends to make a material improvement (major repairs) to the vehicle prior to selling it.
- If the charity intends to make significant intervening use of the vehicle by using the vehicle in their charitable endeavors.
- If the charity intends to give or sell the vehicle to a needy individual at a price significantly below fair market value.
The exception we will highlight in this article is the clause which allows a donor to “claim Fair Market Value if the charity intends to give or sell the vehicle to a needy individual at a price significantly below fair market value.”
IRS Publication 4303 explains this exception as follows:
“Exceptions to Gross Proceeds Limit – Generally, if …the following applies, you may be eligible to deduct your vehicle’s fair market value on the date you donated it.”
“The acknowledgment [sent to donor by the charity] contains a statement certifying that the charity intends to give or sell the vehicle to a needy individual at a price significantly below fair market value and that the gift or sale is in direct furtherance of the charity’s charitable purpose of relieving the poor and distressed or the underprivileged who are in need of a means of transportation…” (http://www.irs.gov/pub/irs-pdf/p4303.pdf)
At Donate A Car 2 Charity, your higher end or newer vehicle may qualify for our “Cars 2 Care” program. If you are contemplating donating your car that is in good, running condition, with an overall good body and a clean title, your vehicle may be eligible for use in our Cars 2 Care program.
For car donations to be considered for the Cars 2 Care program, please follow the steps outlined below:
- At the time of donation, notify the operator, or make a note on the online donation form, that you would like to see if your vehicle qualifies for our Cars 2 Care program.
- If it is determined that your vehicle is potential for use in our Cars 2 Care program, our staff will contact you to request photos and to work out the following:
- Getting your vehicle assessed by a local mechanic for safety and mechanical defects.
- Having your vehicle appraised by a certified appraiser if the value is over $5000
- If your vehicle passes our safety inspection and is determined to qualify for our Cars 2 Care program, you will be notified immediately.
- The vehicle will then be processed and delivered to the qualifying recipient.
- All tax documentation will be forwarded to you after the vehicle has been donated to the qualifying, needy individual or family.
- In the event, your vehicle does not qualify for our Cars 2 Care program for any reason, such as failing the safety inspection or if mechanical or body issues make the car unsuitable in some way, we will notify you and give you the options to have the vehicle returned to you or to proceed with the donation.
- If your vehicle is not accepted into the Cars 2 Care program and you choose to proceed with the donation, you are agreeing that your vehicle will be sold and the proceeds will go to furthering the charitable purposes our nonprofit supports. You will be able to claim a tax deduction on the gross sale price of the vehicle.
If you have any further questions, please contact us 1 (877) 505-5775, or chat live with one of our operators at www.donateacar2charity.com. Thank you for your car donations!