Federal Tax Deductions For Vehicle
Donations
Making a donation to a charity is a great way to get a break on
your federal taxes at the end of the year.
Since there has been a new tax law that took effect in January
2005, the IRS has made determining the amount of your Federal Tax
Deduction for your car donation very simple, which is good news
for everyone.
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 If
you donate a car to charity after December 31, 2004, and your vehicle
is worth more than $500, your Federal Tax deduction amount is determined
in one of two ways.
1. If the car is sold by the charity without any significant
use or material improvement by the charity, the amount of your
deduction is limited to the amount of actual proceeds from its
sale.
2. If the charity intends to make use of the vehicle, you generally
can deduct its actual fair market value.
If the charity sells your vehicle for greater than $500 the charity
also must mail you a letter that states the exact amount that the
vehicle was sold for, and any costs associated with the sale, which
is the value you state for your tax return purposes. You also attach
this letter to your Federal Tax Form 1040 in support of the deduction.
For additional information about car donation tax deductions,
the IRS provides a Guide
to Car Donations, which will state the manner in which the
IRS requires you to determine the value of your donated property.
This guide will contain all the information needed to get the
exact price on your automobile donation. Using this guide will
also make things easier when you decide to donate a car to charity
and then later on gather the tax deduction information.
Latest IRS News
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