Vehicle Donations
&
The New Tax Law
Beginning January 1, 2005, new federal tax legislation
governing vehicle donations goes into effect. The following is a summary
of the new legislation contained in (HR 4520).
Under the new law, allowable deductions for charitable contributions of
vehicles, boats and airplanes (collectively referred to as "assets"
in this summary) for which the claimed value exceeds $500 will depend
how the asset is used by the recipient charity. If the organization sells
the asset without any significant intervening use or material improvement,
the donor’s deduction is limited to the gross sales proceeds received
by the charity. However, if the organization uses the asset in
direct furtherance of its charitable purpose the donor may deduct the
"fair market value" of the asset. (According to the
IRS, the donor, not the recipient charity, must determine the "fair
market value" which the IRS describes as the price that a willing
buyer and willing seller would agree upon if neither were pressured to
do so. Assistance with vehicle values can be found at www.kbb.com
Kelly Blue Book’s web site)
Examples: If a vehicle with a "fair market value" of
$5000 is donated directly to the non-profit charity and the organization
sells the vehicle for $1000, the donor can only deduct $1000. However,
if for instance, the organization provides the vehicle to a disadvantaged
person, the donor may deduct the full "fair market value" of
$5000.
Substantiation requirements when the claimed value exceeds $500
are as follows: No deduction is allowed unless the donor receives a written
acknowledgement from the charity. That document must include the name
and taxpayer identification number (social security number) of the donor
and the vehicle identification number (or similar number) of the asset.
Additional documentation is required but is dependant on how the asset
is used by the charity:
In the event the charity sells the asset without any
significant intervening use or material improvement, the charity must
send a written acknowledgement to the donor within 30 days of the sale
certifying (1) that the asset was sold at an arms length transaction between
unrelated parties, (2) the amount of the gross sales proceeds, and (3)
include a warning that the donor’s deduction is limited to the sales
proceeds.
If the charity intends to make significant use of the donated
asset (such as providing a donated vehicle to a disadvantaged person)
or make material improvements, the required written acknowledgement must
be provided within 30 days of the contribution and must certify: (1) the
intended use and duration of such use or the material improvements to
be made and (2) that the asset will not be transferred in exchange for
money, other property, or services before completion of such use or improvements.
Click here to read about the
donation process.
DONATE YOUR VEHICLE TO THE GIFT OF LOVE
WHEELS TO SUCCESS
(775) 245-1544
www.thegiftoflove.org
