If you plan to give a vehicle to your church or favorite charity, there are some limitations and substantiation requirements to consider.
It will only save you income tax if you itemize deductions on form 1040, Schedule A.
Different rules apply depending on the value of the vehicle.
If the claimed value is $500 or less, just the general substantiation rules apply. The charitable organization is to provide you with a contemporaneous written acknowledgment that describes the vehicle and the fair market value and stating that you were not provided any goods or services in consideration for it. Also, it is good to have a couple of photographs.
If the values is more than $500 but less than $5,000, the charity is to complete and send to IRS (and to you) Form 1098-C, "Contributions of Motor Vehicles, Boats and Airplanes."
The charity is to give you a contemporaneous written acknowledgment and you must attach to acknowledgment to your tax return. The acknowledgment must contain specific information about the vehicle and certification of the charity's use or disposition and of course, the value. "Contemporaneous" means within 30 days.
The allowable deduction amount is the lesser of the fair market value at the time of the donation or what the charity sells it for. The sales proceeds limitation does not apply if the charity gives the vehicle to a needy individual in fulfilling its charitable purpose or sells it for significantly less than the fair market value to a needy individual.
The fair market value is before the charity makes any "material improvement" to the vehicle. Cleaning, minor repairs, routine maintenance and removal of dents and scratches are not considered material improvements.
If the vehicle value is more than $5,000 and the charity does sell it, you should receive a written acknowledgment by the organization that states the vehicle was sold without material improvement (or charity use) and you can only deduct the amount it sold for. If the charity uses the vehicle, then you need to get a qualified appraisal and attach it to your return.
"Fair market value" is not greater than the price listed in an established used vehicle guide (such as Kelley Blue Book or the National Automobile Dealers Association Used Car Guide) for a private party sale. That is not the dealer retail value, it's less than that. The fair market value would be further reduced if the vehicle has engine trouble, body damage, high mileage or excessive wear.
It's great to give and you won't pay insurance, license fees, etc. on it anymore!
Did you hear? "Life is relationships; the rest is just details," by Gary Smalley.
• John Bullis is a certified public accountant, personal financial specialist and certified senior adviser serving Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.
