Car Donation Tax Deduction Information

Car Donation Tax Law changes, effective January 1st, 2005, limit the allowable deduction to:

$500 or the amount the Charity receives from the sale of the vehicle if sold
"Fair market value" if the vehicle is used by the Charity or gifted as part of its mission.

Prior to January 1st, 2005, taxpayers donating a vehicle could deduct the "fair market value". The American Jobs Creation Act of 2004 provides new rules that now limit most deddctions over $500 to the actual sale price the charity receives from selling the vehicle. This sale price is typically less than the previously used "fair market value" as many charities sell donated vehicles wholesale or at auction prices.
There is an exception. You can still claim "fair market value" for a vehicle donation in excess of $500 if:

The charity makes a significant intervening use of the vehicle, such as using it to deliver meals on wheels.
The charity makes a material improvement to the vehicle, i.e., major repairs that significantly increase its value and not mere painting or cleaning.
The charity donates or sells the vehicle to a needy individual at a significantly below-market price, if the transfer furthers the charitable purpose of helping a poor person in need of a means of transportation.
IRS Notice 2006-1 for more information

If you are able to deduct the fair market value (FMV), you will need an appraisal for any vehicle valued at over $5000. To determine the value of vehicles less than $5000, an appraisal can still be used to determine the value, but you will be charge for it. FMV can be estimated using resources such as region Kelley Blue Book values.
If your vehicle deduction totals more than $500, you will need to file IRS Form 8283 (Non-cash Charitable Deductions). More information can be found on IRS Publications 561 and 526. You can find these forms and more information at www.IRS.gov/formspubs/index.html.

Automobile Donations