As a bankruptcy lawyer I deal with a lot of people, who have not been able to purchase a new car in quite a while, and I know that an old car can sometimes be a burden to dispose of. For this reason people sometimes feel that it is easier to donate the vehicle to a charity, who can use the help, and the donors are often intrigued with the idea of taking a tax deduction for the value of the vehicle.
While the tax deduction is available, the tax law contains strict rules for vehicle donations, which apply to trucks, boats and aircraft as well as cars.
In the first place the donor is required to obtain a form 1098-C from the charity and attach the form to his or her tax return. The 1098-C needs to identify the taxpayer, the taxpayer’s identification number and the vehicle’s identification number. The charity must also disclose any goods or services the donor received in exchange for the vehicle.
If the car is sold, which is what many charities do with donated vehicles, the form must also disclose what the proceeds of the sale were, and the tax deduction is limited to the amount of those proceeds. Only when the vehicle is used in the charitable purpose of the organization will the taxpayer be allowed to use an estimated fair market value as a tax deduction.
