In the good old days (before 2005), taxpayers could donate a car to charity and claim a deduction for the fair-market value of the car. It didn’t matter if the charity only sold the car for a few-hundred dollars. The taxpayer could claim a deduction for the fair-market value of the car. That all changed in 2005.
You can still claim a deduction for donating a car to charity, but there are limits on the amount you can deduct. If you donate a car to charity and the charity sells the car as a fundraiser, your deduction is limited to the lesser of the car’s fair-market value or what the charity sold the car for.
Example:
You donate a car with a fair-market value of $2,000 to a charity. The charity sells the car at a fundraising auction, but only gets $800 for the car. Your charitable contribution deduction is limited to $800.
You can still claim the fair-market value as a deduction if the charity uses the car as part of its “stated cause” rather than selling it as a fundraiser.
Donating a car to charity is not always a straightforward tax situation, and there are recordkeeping requirements that must be met. It’s best to consult with a tax pro before making such a donation.
Good advice, Jason. American Institute of Philanthropy also has a useful page at: http://www.charitywatch.org/articles/car.html
The reality is a lot of the charities accepting vehicle donations are using for-profit middlemen that take care of the sale, and they don’t have a huge incentive to get a lot of money for the charity.
-Steve Ketchpel
Steve,
Thanks for the comment and the link. I just checked out your blog and I liked it!
Jason