Minnesota Vietnam Veterans Charity

Vehicle Donation Advantages

Depending on which charity you donate your vehicle and how that charity utilizes your donation, you may still qualify to deduct its “Fair Market Value” on your income tax return.

“If you donate a car to charity after Dec. 31, 2004, and you are eligible to take a tax deduction in excess of $500, your deduction is determined in one of two ways.

If the car is sold without any significant intervening use or material improvement by the charity, your deduction is limited to the amount of gross proceeds from its sale.
If the charity intends to make significant intervening use of or materially improve the car, you generally can deduct its fair market value.” (IRS Pub 4303-A)

How a vehicle is valued

A. If your vehicle needs major repairs such as exchange of a motor or transmission or body work due to an accident, referred to as “material improvement”, but otherwise is generally in good driving condition, it qualifies to be valued at its “fair market value” (FMV) for purpose of your tax deductible contribution.

FMV is the Kelly Blue Book and NADA pricing guide prices minus the labor cost of the major repairs. There is no deduction from the FMV for the cost of an engine transmission or other major components because these components usually are taken from other donated vehicles.

B. Should your vehicle have a greater value for its parts it will be processed as a “Parts Vehicle”. In this case your tax deduction is the “fair market value” of the saleable parts and components. The good parts are inventoried and valued at retail utilizing the national used parts locator computer net work. The “fair market value” is the retail.

C. In the event your donated vehicle is road worthy and does not need major repairs, it will be sold on our agent’s retail used car lot. The selling price is generally close to the NADA price index. The selling price also referred to as “gross proceeds”, is your tax deductible contribution.

D. If your donated vehicle is old, high mileage does not run because of a serious mechanical problem or is close to its last giddy-up-and-go, your vehicle most likely is ready for salvage. For income tax purposes, your contribution deduction cannot exceed $500.

E. The last category of a donated vehicle is where the charity makes significant use of the vehicle in its program or sells the vehicle to a needy person at significantly below market price, then the deduction is the “fair market value”. Vietnam Vets Charity is not involved in this category of vehicle donations.

As proof of your contribution you will be provided with an IRS form 1098-C. The 1098-C will describe your vehicle, how the Vietnam Veterans Charity utilized your vehicle, the dollar amount of your tax deductible contribution. A copy of the 1098-C will be sent to the IRS as proof of your contribution.

Vietnam Vets Charity’s selling agent has been in the vehicle business for over 30 years. They have two locations where used vehicles are sold, combined with facilities for the sale of used vehicle parts, tires, full service mechanical repair shops and recycling facilities where old, damaged and worn-out vehicles are recycled for their metals. Both facilities are licensed to process and properly dispose of waste oils and hazardous materials recovered from salvaged vehicles.

Sale of all vehicles donated to Vietnam Veterans Charity are conducted at retail. Sales at retail result in a higher dollar recovery for our programs while at the same time maximizes the contribution deduction for the donor. A high sales price is especially important to donors if their vehicle falls into category C., because the contribution deduction is limited to the selling price (gross proceeds).

Vehicles with a value in excess of $5,000 are dealt on an individual basis, primarily because vehicles in category A and B may need to be appraised.

If you have questions about our vehicle donation program, please log on to our website. We will do our best to respond within one business day.

Please consult your tax professional for complete information regarding charitable deductions.