Tax Deductible Car Donation
On January 1, 2005 the IRS changed the tax law governing motor vehicle, boat and airplane donations, instituting a fair, straightforward method for valuing tax deductible car donations. As of January 1, 2005 you are able to deduct the gross sales price that the charity of your choice receives on the sale of your car, truck, boat, RV, jetski, snowmobile or airplane.
In the past people, were often hestitant because of the ambiguity of the vehicle valuation process. What was "fair market value", could you use "Blue Book", the answers were not straightforward and individuals risked having their car donation tax deduction disallowed or reduced by the IRS. With the current tax law this confusion is eliminated.
Under the current tax law if your car sells for more than $500, typically at an auction with many potential bidders, your car donation tax deduction will be equal to the gross sales price received at the auction. The gross sales price is the highest bid received before any deductions for auction or other expenses. For cars which sell for over $500 you will receive a letter from the charity which includes all the information required by the IRS; including sale price, your name, address, charity name, address, tax id #, the car description with VIN # and the donation and sale dates for the vehicle. Include a copy of this letter with your tax return and you're all set.
If the car you donate is sold for $500 or less the current IRS tax law stipulates that you can deduct the fair market value of the vehicle up to a maximum of $500. The vast majority of donors whose vehicles sell for $500 or less will be entitled to a $500 deduction. To research the fair market value of your vehicle visit the Kelley Blue Book website. The IRS stipulates that you must use the "private party" valuation option. The tax letter you will receive for vehicles which sell for $500 or less will indicate that your car sold for $500 or less and include all the information required by the IRS; your name, address, charity name, address, tax id #, and the car description with VIN #. Also included is the donation date and sale date of the vehicle.
99% plus of all vehicles donated fall under the regulations detailed above, but in the unlikely event that your donation vehicle is not sold but rather used by the charity, fixed up by the charity and/or given by the charity to a person in need, a different set of tax regulations apply. The IRS publication A Donors Guide to Car Donations details the regulations for all situations.
Please note that all vehicles donated through Donation Line LLC are sold for the charities and thus the donor will receive either the sold for "over $500" letter or sold for "$500 or less" letter detailed above.
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