Car donation tax law changed in 2005 for taxpayers who claim a deduction greater than $500. If the vehicle is sold by the charity, the deduction claimed by the donor cannot exceed the gross proceeds from the sale. Taxpayers also need to supply Form 1098-C to the IRS, or a written acknowledgement by the charity that states the gross proceeds from the sale. The statement needs to be attached to the taxpayer's return. It must contain the Vehicle Identification Number, known as the VIN. The charity must also state in the acknowledgment that the transfer was between unrelated parties.


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Car donation tax deductions are only accepted for donations made to tax-exempt charities. So it is incumbent on the taxpayer to verify an organization's tax-exempt status. Ask to see the charity's IRS letter recognizing it as tax-exempt. You may also call the IRS, toll free, at 1-877-829-5500, to verify an organization's tax-exempt status. IRS Publication 78 lists many organizations eligible to receive tax-deductible charitable contributions, including car donations. Access the information online at www.irs.gov/charities, then download a copy of Publication 78.


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Car donation tax deductions lowered American consumers' tax liability by a whopping $654 million, according to IRS figures for 2000. Vehicle donations are increasingly common, with solicitations for donated cars routine by major charities. While it is easy to find a charity that will take your gift, it is critical to understand new car donation tax law and how the vehicle donation process works. Otherwise, you cannot receive your car donation tax deduction. By making careful decisions, taxpayers can provide support to favorite causes, dispose of unwanted vehicles and get tax breaks. But they must follow car donation IRS rules designed to keep taxpayers from inflating the value of donated vehicles. Be prepared to answer the charity's questions about the vehicle. The charity will ask about the car's condition, mileage and age. If the charity collects the vehicle, it is likely to sell it for proceeds. The amount it receives will be your car donation tax deduction. Gone are the days when every donor could use the fair market value as his or her car donation tax deduction.


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Car donation programs are popular vehicles for charities to raise funds. Car donations appeal to taxpayers who want to get rid of used vehicles and take the tax deductions. IRS rules give specific guidelines for taxpayers seeking a car donation tax deduction. There are several steps to take to meet car donation tax law. * First, verify that the recipient organization is tax-exempt. * If the vehicle is worth $500 or less, you can deduct its fair market value at tax time. * If the vehicle is worth more than $500, your deduction is the amount the charity gets reselling the car. There are special exceptions to this rule. * Finally, research and know state laws regarding title transfers for car donations.


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