- A vehicle must meet certain requirements to be eligible for a tax deduction. The vehicle must be manufactured for primary use on streets and highways, or is a boat or airplane. The vehicle must be privately owned and not part of a commercial fleet, or owned by an automobile dealer.
- In most instances, a vehicle donated to charity is resold by the organization. The individual's maximum tax deduction is equal to the amount of the gross proceeds from that sale. The organization should provide the individual making the donation with a receipt of the transaction that includes the following information: Donor's name, vehicle identification number, date of donation and a statement describing the circumstances of the donation (such as an estimated value of the vehicle), according to the IRS. For tax deductions, the receipt should also include a statement says the vehicle was sold, the date of the sale, the gross proceeds of the sale and a statement that the deduction can't exceed those proceeds. This statement should be received by the donor within 30 days of the sale of the vehicle.
- For those with a car valued at $500 or less, the amount of the tax deduction is based on the vehicle's fair market value. The fair market value is determined by the price someone would pay for the vehicle. It is based on make, model, year and overall condition of the vehicle and can be found in many guides available at bookstores and online.
- The vehicle donation value is only needed for taxpayers who itemize deductions on Schedule A of each year's federal income taxes. Those who claim the standard deduction will not receive additional benefit from a vehicle donation. Receipts and statements from the charity receiving the donation should be kept with tax documentation.
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