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Donating a Vehicle

The IRS has imposed new regulations, effective January 1, 2005, which affect the tax procedures regarding the donation of vehicles to charitable organizations. When a taxpayer donates a vehicle for which the claimed value is $500 or more, the amount of the deduction will depend on how the charity plans to use the vehicle. The charity is required to provide an acknowledgment to the donor, which is attached to the donor’s income tax return. If the auto is sold by the nonprofit, then the deduction is limited to the amount of gross proceeds the organization got from the sale, and the acknowledgment, which must include specific information regarding the sale, must be provided within 30 days of the sale. If the charity plans to use the car for “significant intervening use” of the car, or intends to materially improve the car, the donor can generally claim the fair market value of the donated vehicle. Acknowledgment for this category of donation must be received within 30 days of receipt of contribution. The new law also provides penalties for fraudulent acknowledgments provided to taxpayers. Further information can be found in the links below regarding the new law that affects the donation of vehicles to charities.