Qualifying for a Tax Deduction

You can deduct contributions to charity only if you itemize deductions on your Schedule A of Form 1040. You must take into account certain limitations on charitable contribution deductions. For example, your deduction cannot exceed 50% of your adjusted gross income. Other limitations may apply. Publication 526, Charitable Contributions, provides detailed information on claiming deductions and the deduction limits. It also describes the types of organizations that are qualified to receive taxdeductible contributions. Publication 526 is available online at www.irs.gov or by calling (800) 829-3676 (toll-free).



acknowledgment must include the name of the charity,
a description (but not value) of your car, and one of the
following:
■ a statement that no goods or services were provided by
the charity in return for the contribution, if that was the case,
■ a description and good faith estimate of the value
of goods or services, if any, that the charity provided in
return for the contribution, or
■ a statement that goods or services that the charity
provided in return for the contribution consisted entirely
of intangible religious benefits, if that was the case.
You must get the written acknowledgment on or
before the earlier of the date you file your return for
the year you make the contribution, or the due date,
including extensions, for filing the return. A charity can
provide either a paper copy of the acknowledgment to
the donor, or a charity can provide the acknowledgment
electronically, such as via e-mail addressed to the donor.
Do not attach the acknowledgment to your income tax
return; instead, retain it with your records to substantiate
your contribution

Selecting a Charity

If you are eligible to deduct charitable contributions for federal income tax purposes (see Qualifying for a Tax Deduction later) and you want to claim a deduction for donating your car to charity, then you should make certain that the charity is a qualified organization. Otherwise, your donation will not be tax deductible. The most common types of qualified organizations are section 501(c)(3) organizations, such as charitable, educational, or religious organizations. This publication refers to section 501(c)(3) organizations generally as “charities.” To verify that an organization is a charity qualified to receive tax-deductible contributions, see IRS Publication 78, Cumulative List of Organizations, an annual list of most charities. Publication 78 is available online at www.irs.gov/eo (under the Search for Charities.

Determining the Value of Your Car
The maximum amount you can deduct on your income tax return is the fair market value of your car. Fair market value is the price a willing buyer would pay and a willing seller would accept for the car, when neither party is compelled to buy or sell, and both parties have reasonable knowledge of the relevant facts. Some fundraisers have mistakenly claimed that donors can, in all cases, deduct the full value of their cars as found in a used car guide (such as “blue book” value). A used car guide may be a good starting point to value your car, but you should exercise caution. The IRS will only allow a deduction for the fair market value of the car, which may be substantially less than the “blue book” value. Example: You donate your car to the local high school for use by students studying car repair. Your credit union representative told you that the “blue book” value of the car is $1,600. However, your car needs extensive repairs, and after some checking, you find that you could only sell your car for $750. Your charitable contribution deduction may not exceed $750, the fair market value of the car. For information on determining the value of your car, see Publication 561, Determining the Value of Donated Property. If you used your car in a trade or business, see the rules for contributions of capital gain property in Publication 526.

FOR-PROFIT ENTITY RECEIVES AND SELLS CARS USING CHARITY’S NAME

In this program, the charity grants a for-profit entity the right to use the charity’s name for the purpose of soliciting donations of used cars. The charity receives either a flat fee or a percentage of the proceeds from the sale of the cars to support its charitable programs. The charity has no control over the for-profit entity’s activities. Unlike the preceding programs, the charity has not established an agency relationship with the for-profit entity that is valid under applicable state law; therefore, this program is not the charity’s program. Because the forprofit entity is not an agent of the charity, the donors’ contributions are made to the for-profit entity and are not treated as made to the charity. A charity cannot license its right to receive tax-deductible contributions. The for-profit entity and the charity must not mislead the public by stating that contributions may be deductible (for example, by providing a written acknowledgment that the "contribution" is deductible). Misleading the public in this regard may expose the for-profit entity and the charity to adverse tax consequences.

Types of Car Donation Programs and Their Impacts on Tax-Exempt Status and Deductibility

This section identifies four common types of car donation programs and the tax consequences for a charity and its contributors. CHARITY USES OR DISTRIBUTES CARS* – The charity uses donated cars in its charitable program or distributes the cars to needy individuals. The program should not have an adverse impact on the charity’s taxexempt status. Donors may deduct their contributions (if all other requirements are met).


For most property donations for which the deduction claimed is greater than $5,000, the donor must obtain an appraisal. A qualified appraiser must complete and sign Section B of Form 8283, called the appraisal summary; and an authorized official of the charity must also complete a portion of the form and sign it. The donor must give the charity a copy of Section B. A charity required to sign Form 8283 for receipt of a car must file Form 8282, Donee Information Return, if it sells or otherwise disposes of the car within two years after the date it received the car. This form must be filed within 125 days after the charity disposes of the car. This form requires the charity to identify the donor, the charity, and the amount the charity received upon disposition of the car. The charity must give the donor a copy of the completed Form 8282.

CHARITY SELLS DONATED CARS

This program is similar to the one above, except here the charity sells the donated cars and uses the proceeds to fund its charitable programs. The program should not have an adverse impact on the charity’s tax-exempt status. Donors may deduct their contributions (if all requirements are met).

CHARITY HIRES AGENT TO OPERATE CAR DONATION PROGRAM* – The charity hires a private, for-profit entity as an agent to operate its car donation program. The charity and the for-profit entity must establish an agency relationship that is valid under the applicable state law. Generally, an agency relationship will be established where the parties agree that the for-profit entity will act on the charity’s behalf and that the for-profit entity’s activities covered by the agreement are subject to the charity’s oversight. Accordingly, the charity should actively monitor program operations and have the right to review all contracts, establish rules of conduct, choose or change program operators, approve of or change all advertising, and examine the program’s books and records. If the charity follows these guidelines, the program should not have an adverse impact on the charity’s taxexempt status. Because the for-profit entity is an agent of the charity, donors may deduct their contributions (if all other requirements are met).