Car Donation Tax Article

The American Jobs Creation Act of 2004 will alter the rules for the contribution of used motor vehicles, boats and planes after Dec. 31, 2004.   If the claimed value of the donated motor vehicle, boat or plane exceeds $500 and the item is sold by the charitable organization, the taxpayer is limited to the gross proceeds from the sale.

Under the new rules, the charitable organization must provide an acknowledgement to the donor within 30 days of the sale stating the amount of gross proceeds. Alternatively, if the charity significantly uses or materially improves the vehicles, the charity must certify this intended use and duration and provide an acknowledgement to the donor within 30 days of the contribution. If the charity significantly uses or materially improves the vehicle, generally, the donor may deduct the vehicle’s market value.

Taxpayers should make certain that they contribute their car to an eligible organization; otherwise, their donation will not be tax deductible.   Taxpayers can use the IRS Web site to check that an organization is qualified by searching Publication 78.  Publication 78 is an annual, cumulative list of most organizations that are qualified to receive deductible contributions.  Publication 78 is also available in many public libraries.  In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500.  Be sure to have the organization’s correct name and its headquarters location, if possible.  Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified.  They frequently are not listed in Publication 78.  Donations to these institutions are tax deductible.