Tax Tip: Deduct Your Car Donation

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NEW YORK (MainStreet) — If you donate a used car to charity, the rules for claiming a deduction are different from the normal rules for donating property.  What you can deduct depends on what the charity does with the car.

If the charity sells the car at auction, your tax deduction is the price the car sold for at the auction.

If the charity temporarily or permanently uses the car in its operations, makes "material" improvements to the car before selling it or either gives the car away or sells it at a significantly reduced price, you can deduct the "fair market value" of the car on the date you made the contribution.

To determine the “fair market value,” you can use the "private party value," adjusted for mileage and condition, from the Kelly Blue Book website.  If the value is more than $5,000 you must get a formal appraisal before deducting the donation.

If the value of the car, or the amount received at auction, is more than $500, the charity will give you a Form 1098-C that tells what was done with the car and, in the case of a sale, provides the deductible sale proceeds. You must include Copy B of this form with your 1040 when you file.

The charity can also give you a statement in lieu of a Form 1098-C as long as it contains all the necessary information. The 1098-C, or substitute statement, must be issued within 30 days of either the date of the contribution or the date the car was sold.

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