Determining Your Tax Deduction from an Auto Donation
Your tax deduction depends on how a charity uses your vehicle. Typically, the allowable deduction is limited to the amount of the car’s sale. Charities will be required to provide written notification of the sale amount within 30 days. If you do not receive the acknowledgement from the charity, you will not be able to deduct the donation.
However, if the charity uses the vehicle as part of its programs, you can still deduct the fair market value. Fair market value (FMV) is the price for which the property would sell on the open market – this is not the “blue book” value. You need to take into account your car’s physical condition, mileage, and features, as well as the area used-car market.
The best method for determining the FMV is paying for a written appraisal from an independent, qualified appraiser prior to donating the car. This is mandatory if vehicle value is above $5,000. Even if the charity or its intermediary helps you, place a value on your contribution; your tax deduction is between you and the IRS, if you are audited you will need to prove the deduction was legitimate.
If the total deduction for your non-cash contributions is more than $500, you must fill out and file Section A of IRS Form 8283 (Non-cash Charitable Deductions). If the FMV of the donated property is more than $5,000, you must also fill out Section B (the required appraisal). For more information, check out IRS Publications 561 (Determining the Value of Donated Property) and 526 (Charitable Contributions) available on-line at : www.irs.gov/formspubs/index.html.