HOW TO DONATE VEHICLES

Effective January 1, 2005, the Internal Revenue Service (IRS) modified the rules and requirements surrounding vehicle donations to charities, such as California Waterfowl Association (CWA). 

The tax break that donors receive for donating a vehicle to CWA will depend on how CWA uses the vehicle and the donor's claimed value of the gift. 

Sale or Intervening Use:
Under the new IRS requirements, the amount a donor can claim as a deduction on their taxes for donating a vehicle is usually limted to the amount that CWA receives for selling their donated vehicle to a third party. 

For example, you donate your old station wagon that's worth $1,000.  If CWA turns around and sells your donation for $800, your deduction is limited to the lower sales price.  

However, if instead of selling the vehicle, CWA makes significant “intervening use of the vehicle”, donors may deduct the vehicle’s fair market value on their tax return. 

For example, assume CWA receives a donation of a truck with a fair market value of $1,000.  Instead of selling it, CWA staff uses the truck to perform work on wetlands restoration, which is in accordance with our mission and exempt purpose.  In this case, the donor can claim the full $1,000 fair market value of the truck.  Under the IRS regulations, this is classified as "significant intervening use" of the vehicle that allows the taxpayer to claim the higher deduction.

Donors can generally deduct the vehicle’s fair market value, if the claimed deduction is $500 or less. 

The fair market value cannot exceed the private party sales price listed in a used vehicle pricing guide.

Documentation:
If your deduction is valued at $250 or more, CWA will provide you with a written acknowledgement of your donation.  When the donated vehicle's value (based on credible fair market value analyses) exceeds that amount, claiming the deduction requires further documentation. 

If your deduction is more than $500, the written acknowledgment or IRS Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, must be attached to your return.  Among other things, the acknowledgment generally must include the gross proceeds of the sale, the vehicle identification number, and a statement certifying the vehicle was sold in an arm's length transaction between unrelated parties. 

If CWA keeps the vehicle for their intervening use, the acknowledgment will include details regarding how the vehicle is used for nonprofit work.  Taxpayers must include a copy of the acknowledgment with your tax return.  

In addition, for deductions greater than $500, Form 8283, Noncash Charitable Contributions, must be attached to the return. 

The possibility of a tax benefit from your contribution will vary in accordance with your personal financial situation and what tax form you file.  Any benefit that you might receive would be in the form of a tax deduction.  In order to ensure compliance with IRS requirements as they apply to your specific contribution and circumstances, it is important to consult your personal tax advisor, accountant or qualified tax professional to determine if you will receive a personal benefit.