Tax Benefits For Donating a Vehicle

How deductions work
  • If the vehicle sells for more than $500, your deduction is the gross sale amount.
  • If it sells for $500 or less, you can generally deduct the fair market value up to $500.
  • If the vehicle is used by Habitat, you may deduct fair market value (rare scenarios).

Note: This is general information, not tax advice. Consult a tax professional for your situation.

 

Receipts

You’ll receive an acknowledgment after pickup and a final receipt after the vehicle is sold.

Documentation / What to Look for in the Receipts

  • The IRS requires certain things in the written acknowledgment/receipt:

    • Name and address of the charity

    • Your name

    • Vehicle identification (e.g. make, model, VIN)

    • Date of donation / when you transferred ownership

    • Statement of what the charity did with the vehicle (sold it, used it, etc.)

    • Sales price if it was sold, or fair market value if used by the charity.

    • A statement that no goods/services were provided in return (or, if they were, an estimate of their value).

Limits / Caps

  • If the fair market value is very high, your deduction against your income might be limited (e.g. the percentage of your income you can deduct for charitable contributions). These rules depend on the type of property and type of organization.

  • Also, if you fail to comply with the documentation or appraisal requirements, the IRS might disallow part or all of the deduction.

Additional Things You Should Know (IRS & Best Practices)

To make sure your donation qualifies and you maximize your deduction, here are more detailed rules and tips:

IRS Rules & Tax Reporting
Qualified Organization
  • The nonprofit must be a qualified 501(c)(3) or similarly recognized charitable organization. If it isn’t, the donation usually doesn’t count. Always verify the charity’s tax status and that your receipt shows it.
Fair Market Value (FMV) vs Sale Price
  • If the charity sells the car (or has it sold), and the sale price is over $500, your deduction is the amount the car was sold for (the gross proceeds to the charity). IRS Form 8283 (Section A, for non-appraisal deductions) will generally require that number.
  • If the sale price is $500 or less, your deduction is FMV (how much the car would have sold for on the open market), but up to $500.
  • If the charity uses the vehicle in its operations, or materially improves it before using it, you might be able to deduct the FMV even if it’s more than $500 (but this is rare).
IRS Form 8283
  • If your deduction for a car donation is more than $500, you must fill out Section A of Form 8283: Noncash Charitable Contributions. 
  • If the value claimed is over $5,000, an appraisal is usually required (Section B).
Claiming the Deduction
  • You must itemize deductions on your tax return (i.e. use Schedule A of Form 1040). If you take the standard deduction, you generally can’t claim this.
  • Keep a copy of all documents: acknowledgment from charity, final receipt, any appraisal (if needed), your records of the vehicle’s value, etc.
Timing
  • The deduction is taken in the year you donate. That means the year the charity gets the vehicle (or takes possession of it), not necessarily when you fill out the paperwork.
  • Also, you need the final receipt after the sale to substantiate the amount (if sale > $500)

More About Car For Homes Donation

Questions? Contact us or call (301) 990-0014.

© Habitat for Humanity Metro Maryland · Cars for Homes program.