Determining the Amount You Can Deduct ,
The following rules on deductibility apply to donations of qualified vehicles. A qualified vehicle is any motor vehicle manufactured primarily for use on public streets, roads, and highways; a boat; or an airplane. However, a vehicle held by you primarily for sale to customers, such as inventory of a vehicle dealer, is not a qualified vehicle. If you donated a non-qualified vehicle, see Publication 526 for the rules and limits that apply to property donations. The amount you may deduct for a vehicle contribution depends upon what the charity does with the vehicle as reported in the written acknowledgment you receive from the charity. Charities typically sell the vehicles that are donated to them. If the charity sells the vehicle, generally your deduction is limited to the gross proceeds from the sale. However, there are certain exceptions, described below. Written Acknowledgment for Vehicle Contribution Deduction of More Than $500, What the written acknowledgment must contain depends upon what the charity does with the vehicle. However, all acknowledgments must contain the following information:
■ your name and taxpayer identification number,
● a statement that goods or services provided by the charity consisted entirely of intangible religious benefits, if that was the case. Note: If the acknowledgment does not contain all required information, the deduction may not exceed $500. Gross Proceeds Limit Applies — Generally, if the charity sells your vehicle, your deduction is limited to the gross proceeds the charity receives from its sale. In addition to the information indicated above, the contemporaneous written acknowledgment must contain:
■ a statement certifying that the vehicle was sold in an arm’s length transaction between unrelated parties,
■ the date the vehicle was sold,
■ the gross proceeds received from the sale, and ,
■ a statement that your deduction may not exceed the gross proceeds from the sale. 4 Exceptions to Gross Proceeds Limit — Generally, if one of the following applies, you may be eligible to deduct your vehicle’s fair market value on the date you donated it.
■ The acknowledgment contains a statement certifying that the charity intends to make a significant intervening use of the vehicle, a detailed description of the intended use, the duration of that use, and a certification that the vehicle will not be sold before completion of the use.
■ The acknowledgment contains a statement certifying that the charity intends to make a material improvement to the vehicle, a detailed description of the intended material improvement and a certification that the vehicle will not be sold before completion of the improvement.
■ A special rule applies if the acknowledgment indicates that the donated vehicle sold for $500 or less. In this case, you may claim a deduction for the lesser of the vehicle’s fair market value on the date of the contribution, or $500, provided you get a written acknowledgment from the charity that complies with the requirements described under Written Acknowledgment for a Vehicle Contribution Deduction of $500 or Less, page 5. EXAMPLE 1: On April 1, you donated your car to the local food bank. When you donated the car, you had determined that the fair market value was $4,300. On November 10, the charity sold your car (to someone other than a needy individual), without any significant intervening use or material improvement, and received gross proceeds of $3,700. Your deduction may not exceed $3,700. EXAMPLE 2: The charity certifies in an acknowledgment that it will make significant intervening use of the vehicle by using it daily for at least a year to deliver food to needy individuals. Your deduction may not exceed the fair market value of your car, $4,300. EXAMPLE 3: The facts are the same as in Example 1 except the charity only received gross proceeds of $400 from the sale. Your deduction may not exceed $500. Time and Manner of Providing Acknowledgment — You must obtain the written acknowledgment from the charity within 30 days from the date of the vehicle’s sale, or if an exception applies, within 30 days of the date of the donation. The charity may use Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, as acknowledgment or provide its own statement containing the information described above. Be 5 sure to attach the acknowledgment and Form 8283, Noncash Charitable Contributions (see below), to your return. Written Acknowledgment for a Vehicle Contribution Deduction of $500 or Less, If you are claiming at least $250 but not more than $500 as the value of your vehicle, the acknowledgment must include the name of the charity, a description (but not value) of your vehicle, and one of the following:
■ a statement that no goods or services were provided by the charity in return for the donation, if that was the case,
■ a description and good faith estimate of the value of goods or services, if any, that the charity provided in return for the donation, or
■ a statement that goods or services provided by the charity consisted entirely of intangible religious benefits, if that was the case. Time and Manner of Providing Acknowledgment — You must obtain the written acknowledgment on or before the earlier of the date you file your return for the year you donated the vehicle, or the due date, including extensions, for filing the return. A charity can provide you with a paper copy of the acknowledgment, or it can provide the acknowledgment electronically, such as via an email addressed to you. Do not attach the acknowledgment to your income tax return; instead, retain it with your records to substantiate your donation.
If you use a vehicle pricing guide to determine fair market value, be sure that the sales price listed is for a vehicle that is the same make, model, and year, sold in the same condition, and with the same or substantially similar options or accessories, as your vehicle. Moreover, the fair market value of a vehicle cannot exceed the price listed for a private-party sale. EXAMPLE: You donate your car to a local charity that provides you with an acknowledgment certifying that it intends to make a significant intervening use of the car. Your credit union representative told you that the price listed for a private-party sale in a vehicle pricing guide could be as high as $1,600.