Claiming a Deduction For A Donated Vehicle

Not long ago, if you donated a vehicle to charity, taking it as a tax deduction was relatively simple. But that's no longer the case.

Over the last few years, the Internal Revenue Service (IRS) has changed the rules regarding the types and value of these deductions. Your recordkeeping and filing requirements depend on the amount of your claimed deduction.

Small claim requires less documentation

For example, If you claim a deduction of at least $250 but not more than $500 for the car donation, you will need a written acknowledgment from the charity.  The acknowledgment must be obtained by the earlier of the date you file your return for the year of the donation, or the due date of the return with extensions. 

The acknowledgment must include a description of the car and a statement as to whether the charity provided any goods or services in return for the car and, if so, a description and good faith estimate of the value of the goods and services.

You do not need to attach the written acknowledgment to your return.  Instead retain it with your records to substantiate your donation. The rules get more complex the more you claim as a deduction for your donation.

More paperwork

If you claim a deduction of more than $500 but not more than $5000 for the car donation, you will need to attach to your return the following:

• Section A of Form 8283, Noncash Charitable Contributions. 
• A written acknowledgment from the charity that includes your name and taxpayer identification number, the vehicle identification number, the date of the donation, a certification that the car was sold in an arm's length transaction between unrelated parties, the date the car was sold, the gross proceeds of the sale and a statement that the deductible amount may not exceed the amount of such gross proceeds. For this acknowledgement to be considered timely, generally it must be received by you within 30 days of the sale of the car.
• In lieu of a written acknowledgment, the charity may provide you a completed Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes. 

If you claim a deduction of more than $5,000 for the car donation, in addition to the items listed above (with the exception of Section A of Form 8283), which you must attach to your return, you will need to complete Form 8283,Section B and attach the form to your return.  An appraisal is not required if your deduction is limited to the gross proceeds of the sale.

For more information about writing a vehicle donation, check out IRS Publication 4303.