Not all charitable donations are created equal, and some provide larger tax deductions than others. And it’s not always how much or what you donate that matters. What might affect your tax deduction the most is how the charity uses your donation.

For example, if you donate your vehicle, the value of your tax deduction can vary greatly depending on what the charity does with it.

Determining Your Tax Deduction from a Vehicle Donation
You can deduct the vehicle’s fair market value (FMV) on your taxes if the charity:

  • Uses the vehicle for a significant charitable purpose (such as delivering meals-on-wheels to the elderly)
  • Sells the vehicle for substantially less than FMV in furtherance of a charitable purpose (such as a sale to a low-income person needing transportation)
  • Makes “material improvements” to the vehicle.

But in any other circumstances, if the charity sells the vehicle, your tax deduction is limited to the amount of the sales proceeds.

Getting Proper Substantiation
You also must obtain proper substantiation from the charity, including a written acknowledgment that:

  • Certifies whether the charity sold the vehicle or retained it for use for a charitable purpose
  • Includes your name and tax identification number and the vehicle identification number
  • Reports, if applicable, details concerning the sale of the vehicle within 30 days of the sale.

Contact your advisor for more information on these and other rules that apply to vehicle donation tax deductions — or tax deductions for other charitable gift.