- It must be in running condition or able to be easily repaired
- It must be donated to a qualified charitable organization
The amount of the deduction is based on the fair market value of the car at the time of donation, regardless of whether it actually gets repaired or used by the organization. However, there are some important changes to the tax law that you need to be aware of if you are considering donating a car.
Taxpayers can no longer use the actual sale price of a vehicle donated to charity to determine the value of their charitable contribution. Instead, taxpayers must determine the fair market value of the vehicle based on one of the following three methods:
1) The purchase price of the vehicle (if the purchase was made within 12 months of the date of donation),
2) the average retail value of the vehicle (as published in a pricing guide like those available from Kelley Blue Book or NADA Guides) or
3) the price that the charity sells the vehicle for (minus certain costs to the charity).
In cases where the sales price of a vehicle is greater than the fair market value, the donor can only claim the lesser of the two amounts as a charitable deduction. It is important to keep in mind that donations to charitable organizations must be substantiated. To substantiate your junk car donation, you will need to obtain a written acknowledgment from the charitable organization that includes the name and address of the organization, the date of the donation, a description of the vehicle, and a statement that the organization intends to use the vehicle for its charitable purposes.
Given these changes to the tax law, it is advisable to consult with a tax advisor to ensure that you properly claim the charitable deduction for your junk car donation and adhere to all applicable regulations.
