The Internal Revenue Service (IRS) is trying to clear up confusion regarding when the donation of a car to charities is a proper federal tax deduction.
The IRS is releasing two publications, “A Charity Guide to Car Donations” and “A Donor’s Guide to Car Donations,” designed to assist donors.
“We want people and the charities to make sure they are taking the proper steps involving vehicle donations,” said IRS commissioner Mark Everson.
“Supporting charitable activities through tax-deductible contributions is an important element of tax law and serves the national interest,” he said.
“But we encourage people to proceed carefully when donating vehicles. There are instances where the donations may provide little benefit to the charity,” he warned.
Everson admits that “for a taxpayer, the appeal of a car donation is simple: Unload an old car, help a worthy cause and take advantage of tax provisions designed to support the generosity of Americans.
“Taxpayers who itemize their deducations may be able to claim contribution for the cars they donate to charity.
“The deduction may not exceed the fair market value of the car,” the IRS commissioner says.
In recent years, the number of car donation programs has increased dramatically, he said.
“This growth, however, has taken place without taxpayers and charities always understanding their obligations under the tax law,” he said.
“A Charity’s Guide to Car Donations,” labeled Publication 4302, describes several different car donation programs, filing and disclosure requirements for charities operating these programs.
Included among the descriptions of vehicle donation programs is an example of an arrangement that would fail to preserve the deductibility of a contribution, Everson said.
“A Donor’s Guide to Car Deductions,” labeled Publication 4303, tells taxpayers that they need to make sure they are donating their vehicle to qualified organizations, receive a written acknowledgement from the charity, keep records and properly assess the fair market value of their vehicle.
Both publications are designed to help individual taxpayers and charities participate in the car donation programs in compliance with the tax law.
Both publications are available at www.IRS.gov