Your Donated Car Is Only A $500 Deduction Without Proof

Forget what Kelley Blue Book says. Forget how much you paid or whether you've just overhauled the engine. If you donate a car to charity, the U.S. Internal Revenue Service (IRS) wants to remind you that you can only claim a $500 deduction.

The only exception to this rule is if the charity sells the car for more than $500. In tax-speak, that translates to deductions are "limited to the gross proceeds from the sale of the vehicle by the charity. The charity must provide a written acknowledgment within 30 days after the vehicle is sold that notifies the taxpayer of the amount of the gross sales proceeds."

That is the big news the agency reminded taxpayers of on December 22 as the year wrapped up, and taxpayers began opening their new copies of TurboTax. The IRS also cautioned that all deductions require a "charity’s written acknowledgment". In the real world, we call those receipts.

So that 1984 Nissan Stanza in the shed behind the garage? You can deduct what the charity sells the car for (yes, they're required to let you know). As with any tax issue, there are some exceptions, notably here if the vehicle is sold for less for charitable purposes, so always check with your tax preparer or the IRS itself before basing your return on blog entries and other information you've stumbled upon in the media or on the web.

posted by Consumer Help Web Editorial Team at 9:45 AM |