Planes, Boats, and Automobiles

Have you seen an ad recently asking you to give your vehicle to charity?  They seem to be everywhere, and they promise big tax benefits.

Be sure to do your homework… more paperwork is required for auto donations than other donations.  Be aware these rules apply to boats (and airplanes) as well.

Is the charity qualified?  Check the list:

http://www.irs.gov/charities/article/0,,id=96136,00.html

Do you itemize your deductions?
Typically if you are paying on a mortgage, you itemize.  High medical expenses, charitable donations, or state income taxes may also cause you to itemize.  If you do not itemize normally, your auto donation may not help you.

How much is your vehicle worth?
While the Blue Book value is a good place to start, you need to know the Fair Market Value of your vehicle.  What would a willing buyer actually pay for your vehicle, considering its current condition?  If you paid less than the current fair market value, your cost is your maximum deduction.

Is your vehicle worth more than $250?
The charity must give you a receipt.  Keep this with your tax records.

Is your vehicle worth more than $500?
If the organization sold your vehicle after donation, you may deduct the lower of the sales price or the fair market value (or your cost).  The charity is required to provide you Form 1098-C, and this form must be attached to your tax return.  If you have not received it, you may need to file an extension.

Is your vehicle worth more than $5,000?
You need an appraisal within 60 days of the donation.  You must also have a signature from the charity on Section B of Form 8283, which must be attached to your tax return.  The Form 1098-C rules above still apply.

This article is intended as an overview of a complex tax area.  Please consult your tax advisor for advice specific to your situation.

CIRCULAR 230 DISCLAIMER:  Pursuant to U.S. Treasury Department Regulations, we are required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Sources:  IRS Publications 4303 and 526