All charitable donations aren’t created equal — some provide larger deductions than others. It isn’t necessarily just how much or even what you donate that matters, how the charity uses your donation might also affect your deduction.
Take vehicle donations, for example. If you donate your vehicle, the value of your deduction can vary greatly depending on what the charity does with it.
Determining your deduction
You can deduct the vehicle’s fair market value (FMV) if the charity:
  • Uses the vehicle for a charitable purpose (such as delivering meals-on-wheels to the elderly),
  • Sells the vehicle for substantially less than FMV in furtherance of a charitable purpose (such as a sale to a low-income person needing transportation), or
  • Makes “material improvements” to the vehicle (such as a donation to a college auto repair class)
But in most other circumstances, if the charity sells the vehicle your deduction is limited to the amount of the sales proceeds.  If the vehicle was used as a business asset your deduction may also be limited to your remaining basis which at times can lead to no charitable deduction.
Getting proper substantiation
You also must obtain proper substantiation from the charity, including a written acknowledgment that:
  • Certifies whether the charity sold the vehicle or retained it for use for a charitable purpose,
  • Includes your name and tax identification number and the vehicle identification number, and
  • Reports, if applicable, details concerning the sale of the vehicle within 30 days of the sale.
  • If the vehicle is valued at more than $500 you should receive form 1098-C from the organization.
  • If you are donating a vehicle with substantial value an appraisal or other substantiation may be required.
For more information on these and other rules that apply to vehicle donation deductions — or deductions for other charitable gifts — please contact us.