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Autos—Recycle, Reuse and Donate?

Do you have an old car that is offering very little in trade-in value or that you are looking to get rid of without the hassle of selling? You could receive tax savings by donating to charity.

In order to obtain a charitable contribution deduction for the donation of a vehicle, you need to donate it to a qualifying charity and receive proper substantiation. The amount of the deductible charitable contribution depends on the charity's use of the car. If the charity sells the car, your charitable donation will be the amount for which the charity sold the car, assuming the charity does not make material improvements. If the charity uses the vehicle in its operations or makes material improvements, your donation will be the fair market value of the vehicle. The fair value market of the vehicle is usually determined according to National Automotive Dealers Association (NASDA) guides for used cars. However, please be aware, the Treasury and Congress were concerned about aggressively high valuations assigned to donated autos. They will require you to examine issues such as the condition of the car and mileage driven when valuing the auto.

• If the vehicle donated is valued at more than $500, you will need to fill out and submit Form 1098-C or provide similar information as listed below to substantiate your contribution.
• Acknowledgement from the charitable organization of your donation containing your name, Social Security number, vehicle ID number (VIN number) and description of transaction
• Acknowledgement from the charitable organization indicating whether there will be a sale, use or improvement of the vehicle
• If sold, certification that the vehicle was sold in an arm's-length transaction to an unrelated party, the gross proceeds of the sale and a statement that the charitable deduction cannot exceed the sales price
• If the car will be used by the charity or will be materially improved, the acknowledgement needs to certify the intended use or improvement and the intended duration of the use, along with a statement that the car will not be sold before completion of the use or improvement

The charity should provide the acknowledgement within 30 days of the sale of the vehicle or within 30 days from the donation date if the car will be used by the charity.

Think twice about junking that old car, as you might be able to get a tax benefit from donating it to charity.

For more information please contact Cara Hoffman at 312-980-3274 or your Blackman Kallick representative.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.