Donating a vehicle to a qualified charitable organization is a great way to get rid of an unwanted car or truck, help the charity, and get a tax deduction. But make sure you’re following all the IRS’s guidelines on deducting a donated car!
For starters, you need documentation from the charity that includes your name, the charity’s tax ID number, and the VIN number of the donated vehicle. If the charity sells the vehicle, you also need documentation of the gross proceeds of the sale and the date of the transaction. You’ll need to include this information on Form 1098-C when you file your tax return.
In terms of the amount you can deduct, don’t assume you can deduct the total fair market value (FMV) of any donated vehicle. In most cases, when you donate a vehicle, the charity resells it to a wholesaler, often for less than the vehicle is worth. When this happens, if your deduction is more than $500, it is limited to the gross proceeds the charity earned from the sale of the vehicle.
However, if the charity retains the vehicle for its own use as a part of its charitable mission, you can deduct the FMV of the vehicle. Additionally, if the charity gives the vehicle away (or sells it at significantly below FMV) to a needy individual as part of its charitable mission, you may also be able to deduct the FMV of the vehicle.
Have questions about donating a vehicle to charity? Talk to the Taxation Solutions, Inc. team to find out the best way to maximize your deduction and more!