These factors can have a big impact.
Some charitable donations provide larger deductions than others, and it isn’t necessarily based on how much – or even what – you donate that matters. How the charity uses your donation can have a large outcome on your deduction.
Take vehicle donations, for example. If you donate your vehicle, the value of your deduction can substantially vary depending on how the charity chooses to use the vehicle.
Determining your deduction
You can deduct the vehicle’s fair market value (FMV) if the charity:
- Uses the vehicle for a significant charitable purpose (such as delivering meals-on-wheels to the elderly),
- Sells the vehicle for substantially less than FMV specifically for a charitable purpose (such as a sale to a low-income person needing transportation), or
- Makes “material improvements” to the vehicle.
But in most other circumstances, if the charity sells the vehicle, your deduction is limited to the amount of the sales proceeds.
Getting proper substantiation
You also must obtain proper substantiation from the charity, including a written acknowledgment that:
- Certifies whether the charity sold the vehicle or retained it to use for a charitable purpose,
- Includes your name and tax identification number and the vehicle identification number, and
- Reports, if applicable, details concerning the sale of the vehicle within 30 days of the sale.
For more information on these and other rules that apply to the deductions of charitable gifts, please contact us.
We highly recommend you confer with your Miller Kaplan advisor to understand your specific situation and how this impacts you.