Getting rid of an old or junk vehicle can be more time and expense than the car is worth. Donating that jalopy to charity can eliminate the hassles. Many charities are happy to accept junk vehicle donations and even provide free pickup. You get to avoid the headaches and help a worthier cause. Just to top things off, you can probably get a nice tax write-off in the bargain.
IRS Policy
In most cases, IRS regulations say you must use the gross proceeds of the sale of the vehicle as the amount of your tax deduction. This applies to boats and small aircraft as well as cars, vans and light trucks. Once you've donated a junk vehicle, the receiving charity or its donation service normally sells the vehicle at auction. The charity must send you a statement acknowledging the sale and stating the sale price within 30 days of the sale.
Exceptions
There are situations in which you may use fair market value instead of a sale price as the amount of your tax deduction for a vehicle donation. This is important if you are donating a junk vehicle because one exception is if the sale price is under $500. In this case, you may use either fair market value (up to $499) or the sale price, whichever is greater. You can also use fair market value when the charity chooses to keep the vehicle for its own use or make substantial repairs.
Preparation
There are a couple of things you should do before donating a junk vehicle. First, verify that the charity is qualified to accept donations under IRS rules. If it's not, the IRS won't accept your tax deduction. Many eligible charities are listed in IRS Publication 78 (Qualified Charities), which is available online at IRS.gov. You can also call the IRS at 877-829-5500 if you aren't sure a charity is qualified. Second, since there's a very good chance a junk vehicle will sell for less than $500, follow IRS guidelines to estimate the fair market value before you make the donation. IRS publication 561 (Determining the Value of Donated Property) is available at IRS.gov.
Tax Procedure
To take a tax deduction for donated cars or other property, you have to file an itemized tax return. You must complete and attach form 8283 (Noncash Charitable Donations). Only complete section "A" unless you have donated property with a total value of $5,000 or more for the year. In the latter case, complete section "B."
Tags: junk vehicle, fair market, fair market value, market value, sale price
