Is a Car Donation Made in Michigan Tax Deductible?

When you give it away to charity, you need to prove what it's worth.

When you give it away to charity, you need to prove what it's worth.

When you claim charitable donations on your income tax, it doesn't matter where you live. The rules for federal income tax deductions apply throughout the country: you can write off donating a car whether you do it in Michigan or Mississippi, provided the gift meets IRS standards. You can only claim the write-off, however, if you itemize on Schedule A.

Who You Give To

Giving a needy family a car is generous, but it's not deductible. Donations have to go to organizations approved by the IRS for tax-deductible contributions; the IRS website lists them in a searchable database. You also can't claim a write-off if you give the car to charity and ask that the vehicle -- or the proceeds from selling it -- go to a particular person. You can give to charities that help individuals; you just can't specify who gets help.

Car Values

One advantage of giving away a car is that used-car price guides make it easy to figure out the value. Use the figure listed in the guide for a private sale, rather than buying from a dealer, and reduce the price for problems such as a bad engine or an oil leak. If the organization gives the car away, you usually claim the fair market value as your deduction. If the charity sells the car, you take the value or the sale price, whichever is less.

Paperwork

If your deduction is less than $250, you need a receipt from the charity identifying the group, giving the time and place of the donation, and describing the car. The more your car is worth, the more paperwork the IRS will want to see if it ever audits you; above $5,000, you need a professional appraisal. The charity should send you a 1098-C form reporting the proceeds if the group sold your car. You have to include a copy of the form with your return.

Special Cases

If your car has actually gained in value since you bought it -- it's a classic collectible, say -- the amount you can write off is different. Instead of using the current fair market value, the IRS usually expects you to apply the original purchase price. If you're a professional car dealer and you donate some of your stock, you can claim either the fair market value or the original cost of buying the cars.

About the Author

Author of two film reference books, "Cyborgs, Santa Claus and Satan" and "The Wizard of Oz Catalog." Published in Air & Space, Backpacker, Newsweek, The Writer, and multiple trade journals (can fax samples if requested, don't have them available digitally)

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