John R. Bullis: Donate vehicle to charity for tax deduction
If you are considering donation of your car, truck, boat or aircraft to a church or other charity, here are some of the tax rules you need to know.
You should receive from the charity and attach to your tax return either Form 1098-C or a similar written acknowledgment that is done on or about the date of the donation. The information required includes your name and social security numbers, the vehicles identification numbers and description as well as the good faith estimate of the fair market value at the time of the gift.
The charity should give you a statement that shows the value of anything you received for making the donation-probably nil or none or only intangible religious benefits.
The amount of the donation depends upon whether the charity sells the vehicle or uses it in their charitable activities (mission).
If the charity sells the vehicle without doing any material improvements (or major use of it before selling), the charity is to give written certification it was sold at arms length value to an unrelated party (and the details of the sale). An appraisal is fairly easy to get from a dealership or other qualified appraisers. The donation amount is usually what the charity sells it for.
If the charity sells the vehicle to a needy person for less than the fair market value, or just gives it to the needy person, you can claim a charitable contribution equal to the fair market value as long as the sale or gift by the charity furthers the charity’s purpose.
If the charity sells the vehicle at an auction, that sales price is usually the amount of your deduction. Of course IRS wants the details.
Sometimes the charity will keep the vehicle and use it in the charity’s mission and activity. The charity might make some significant improvements to the vehicle (fix problems, do major repairs, etc). Then you can claim the fair market value of the gift, before the improvements by the charity.
A few years ago, a client gave a vehicle to a charity. We asked for the form 1098-C, etc. but our client did not receive anything from the charity. Later it was discovered an employee of the charity kept the item for his personal use. It all got corrected and the client finally got the deduction but it was more work and time than usual.
We all have more “stuff” than we need. Giving some of that to charities seems to be a good idea.
Did you hear? “Like mothers, taxes are often misunderstood, but seldom forgotten,” by L. J. Bramwell.
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.