Car Donation Tax Laws

Written by Rylee Newton
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In January of 2005, the rules for donating cars and other vehicles to charitable organizations changed. With the passage of HR 4520, you can no longer simply write-off the fair market value for car donations with values over $500. The Bush Administration initiated this bill to cut back on the over-estimation of the value of charitable donations. The law also helps to simply the donation process.

The new law stipulates that the charitable organization determines the value of your donation based on the final sale price for your vehicle. By law, the charitable organization must provide you with a written acknowledgment of your contribution within 30 days of your donation. The law also holds charitable organizations responsible for any false information contained in this written acknowledgment. This law helps to protect individuals from fraudulent reporting by charities.

New Tax Laws for Vehicle Donations

If you donate a vehicle to charitable organization, and it is used by that organization for daily activities, you may be able to write-off the fair market value for your vehicle. This provision in the new law requires the charitable organization to provide a written acknowledgment of the intended use for the vehicle. Writing off your contribution for the fair market value often means increased deductions.

Some people have criticized the new tax laws because they feel it discourages people from donating their vehicles. While this may be the case for some people, the law actually provides a level of convenience for many others. It takes the guesswork out of assessing the value of your contribution, and also helps to protect donors from being audited by the IRS.

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