To find out how to avoid potential problems with IRS when donating a car to a charity and so that you can get a tax deduction, answer the following questions....

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IRS Officials Urge Care for Those Making a Car Donation

Source:IR2005-145, Dec. 20, 2005 &IR-2004-142, Nov. 30, 2004 & IRS Publication 4303

To avoid potential problems when donating a car to a charity so you can get a tax deduction answer the following questions

Can you itemize?

That's usually true if you won a home, have unusual medical expenses or have a large amount of unreimbursed employment expenses. Mechanics and Police Officers often can itemize because they have to buy a lot of expensive tools and equipment.

The best way to figure out if you can itemize is to look at last years taxes. If you see the words “Schedule A” on top of a form, you itemized. If you filed a 1040EZ or 1040A you didn't. So, if nothing is changed like buying a house, you will probably file the same way this year.

If you can't itemize, donating your car will only have the benefit of getting it out of the driveway without paying the junk man. You can't deduct your car or any other contributions for that matter unless you itemize. I know I'll have to look over my shoulder for angry charity telemarketers but hey, the truth hurts.


Will you get more money in the form of a tax break than if you sold the car yourself?

If your income and deductions are about the same this year, the answer can be found on your tax return. Look at the line that says “taxable income”.

If you haven't got any, donating your car won't help you. You'll just loose the money you would have gotten selling the car. If you have a more complicated case, contact your Tax Preparer and let them get Excedrin headache #52.

Is the organization qualified?

Meaning is it on the IRS's list of approved organizations. This list is found in the ever fascinating Publication 78 (go to for this) or chat with an IRS representative personally @1-877-829-5500.

Classical music fans will enjoy the hold music. Have the organization’s correct name and its headquarters location available. temples, mosques and governments automatically qualify.

If you answered “No” to any of the above questions, you can't deduct your car.

If you answered “Yes” to all these questions, you can deduct your vehicle. Just make sure you observe the following rules:


Deduct Gross Proceeds of the Sale

For vehicles (you can donate your boat or plane also) with a claimed value of more than $500, you are generally allowed to deduct only how much the charity got for selling your car.

This is called the “gross proceeds of the sale”.

Exceptions apply if the charity sold the car to a needy individual, made “material improvements” or “significant intervening use of the vehicle”. If any of these apply then you can take “Fair Market Value”.

But be careful, because “Fair Market Value” is not necessarily what the Blue Book says and the charity must provide you with documentation saying you can take fair market value.

Check with your Tax Preparer or read the titillating Pub 4303 -”A Donors Guide to Car Donations” ( a real page turner) for the full story. Space limits us from covering each exciting detail.

Get written acknowledgment from the Charity. Some of the documentation requirements listed by Publication 4303 include:

Your Name and taxpayer identification number

The vehicle identification number,

The date of the contribution, and one of the following:

Statement that no goods or services were provided by the charity in return for the donation, if that was the case,

Description and good faith estimate of the value of goods or services, if any, that the charity provided in return for the donation, or...

Statement that goods or services provided by the charity consisted entirely of intangible religious benefits, if that was the case.

Note: If the acknowledgment does not contain all required information,the deduction may not exceed $500.


The long and short of this story is to look before you leap so you can get the best deal for yourself. As always , we're here to help.


The Tiger, Mike Bronstein,CPA, Elizabeth Marasco MBA
Tiger Tax and Accounting Services
354 Neighborhood Rd
Mastic Beach, NY 11951
(Across from John's Pizza)
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