Ads soliciting charitable donations of cares are all over. You might go along with one of these pitches or donate a vehicle to another worthy cause.
Strategy: Insist on certain conditions first. Notably, you should specify that the charity must use your vehicle in furtherance of its tax-exempt purpose (e.g., delivering food to the elderly).
Subject to the other rules for charitable gifts, you can then deduct an amount equal to the vehicle’s fair market value (FMV).
However, under current law, if you donate a vehicle with a value exceeding $500 and the charity sells it instead of using it, your deduction is limited to the amount received in the sale by the charity
If the charity materially improves the vehicle (e.g., repairs major problems or installs new features) or significantly uses the vehicle in its charitable purpose and certifies that use, you can still deduct the FMV.
In any event, be aware of these requirements when you donate a vehicle to charity:
- The charity that received the donated car must be and IRS-approved charitable organization qualified to receive deductible contributions.
- In the best-case scenario, the deduction cannot exceed the vehicle’s FMV. That doesn’t mean the highest value listed in a used car buyer’s guide for the make and model. Factors such as the vehicles equipment, mileage and condition must be taken into account.
- The donation and the FMV must be properly documented. The record-keeping requirements in this area depend on the value claimed on the total amount of your annual charitable donations.