Car Donation Tax

Ever since January 1, 2005, the IRS requires all car donation charities to send the donor a sale stating the amount of gross proceeds they make from the sale of the automobile donations within 30 days of the sale taking place. If the charity significantly uses or improves the vehicles, the charity must certify this intended use of the vehicle and send an acknowledgment of this to the donor within 30 days of the new car donation (only new car owner can receive this tax deduction; owners of previously owned vehicles do not qualify). Generally, under this scenario, the donor can deduct the fair market value for the automobile he or she donated.

This differed from earlier years where the donor could receive fair market value for his or her donations regardless of what the charity decided to do with the vehicle. The basis of the car donation tax deduction IRS rules on how much your charitable car donation actually is worth is based on IRS Tax Publication 4303. In that publication, it is stated that the receipt of your automobile donation must have the following information:

1. Your name and your taxpayer identification number
2. The vehicle’s identification number
3. The date of when the contribution is made

Along with one of the following pieces of information:

1. A statement that the donation provided no goods or services to you in return for your car donation.
2. A description and a good faith estimate of the value of goods or services that the charity provided to you in return for the donation
3. A statement that the goods or services provided by the charity were made entirely of intangible religious benefits

The change in this law occurred because Congress wanted to stop the overinflated values that many citizens were listing when providing their tax deductible car donations on their tax forms. As a result, more money is being provided for Congress to use thanks to the change in the car donation tax break law.