Can I Deduct More Than One Car Donation on My Taxes?
The Internal Revenue Code does not limit the number of deductible charitable donations you can make in a single tax year. The same rules apply whether you donate one car or 500 cars. However, you must ensure that you satisfy all requirements for each separate vehicle donation. Initially, you must ensure you make the donation to a qualified nonprofit charity that promotes charitable, humanitarian, educational, scientific, literary or religious causes.
Annual deduction limitations
Although there is no limit on the number of cars you can donate, the IRS does limit the amount of your total charitable contribution deduction each year. Generally, you can deduct the value for all vehicles you donate if the total does not exceed 50 percent of your Adjusted Gross Income (AGI). If you have insufficient AGI to claim the full value of your donations in the current tax year, you can deduct the excess in any of the next five tax years.
Valuing your car donations
Unlike other property you donate to charity, the IRS imposes more restrictions on how you can assess the fair market value of a car. It requires you to reference a used-car price guide when assessing value. There are multiple guides you can use; however, you must reference one that considers the vehicle’s make, model, year, mileage and condition in its price assessment. In addition, taxpayers may only use the private-party sale prices rather than the price a used-car dealership charges for similar vehicles.
Documenting your car donations
For each vehicle that you value at more than $500, you must deduct the smaller of its fair market value or the gross proceeds the charity obtains in a subsequent sale. Charitable organizations that accept used vehicles must provide you with a Form 1098-C that reports the proceeds of the sale. When the organization sells the vehicle for $500 or less, the IRS limits your deduction to the smaller amount — either $500 or the fair market value of the vehicle on the date of contribution.
Reporting your car donation deduction
To claim the charitable contributions deduction for your cars, you must be eligible to itemize your deductions by incurring total deductible expenses during the year that exceed the standard deduction amount. If eligible, you must include all charitable donations on the Schedule A attachment to your personal income tax return. You must also complete an IRS Form 8283 if any single donation results in a deduction of $500 or more. The IRS imposes severe penalties on taxpayers who grossly overvalue their vehicle donations. If you report a car value that is 150 percent or more of its true value, you may incur a penalty of 20 percent calculated on the underpayment of tax that directly results from the overvaluation. The penalty increases to 40 percent for values that are 200 percent or more of actual value. The IRS provides a guide for determining the value of donated property.