Vehicle Donations

IR-2005-149, December 22, 2005

WASHINGTON – Internal Revenue Service officials today reminded taxpayers that they must obtain a charity’s written acknowledgment of their vehicle donation before they claim a deduction for their donation.  For deductions of more than $500, the taxpayer is required to attach the acknowledgment to the taxpayer’s return for the year of the donation.

Effective for vehicles donated to charity on or after January 1, 2005, the American Jobs Creation Act of 2004 provides that, generally, a taxpayer’s deduction is limited to the gross proceeds from the sale of the vehicle by the charity.  The charity must provide a written acknowledgment within 30 days after the vehicle is sold that notifies the taxpayer of the amount of the gross sales proceeds.

The IRS is aware that questions have arisen as to whether the charity must sell the vehicle in 2005 in order for the donor who donated a vehicle in 2005 to receive a deduction for 2005.  The charity does not need to sell the vehicle in 2005.  A taxpayer can take a charitable contribution deduction only for the year the vehicle is transferred to the charity, even if the vehicle is not sold by the charity until a later year.  (Only taxpayers who itemize their deductions can take a charitable contribution deduction.)

However, a taxpayer cannot take a charitable contribution deduction of $500 or more for a vehicle donation unless the taxpayer has received a written acknowledgment of the donation from the charity and attached the acknowledgment to the return.

If the taxpayer receives the written acknowledgment after filing the tax return for the year of the donation, the taxpayer may, after receiving the acknowledgment, file an amended return for that year and claim the deduction on the amended return.  The taxpayer must attach the acknowledgment to the amended return.


Notice 2005-44 explains new rules adopted in the American Jobs Creation Act of 2004, which (1) generally limits the deduction to the actual sales prices of the vehicle when sold by the donee charity, and (2) requires donors to get a timely acknowledgment from the charity to claim the deduction.

Donors may claim a deduction of the vehicle’s fair market value under the following circumstances:

  • The charity makes a significant intervening use of the vehicle, such as using it to deliver meals on wheels.
  • The charity makes a material improvement to the vehicle, i.e., major repairs that significantly increase its value and not mere painting or cleaning.
  • The charity donates or sells the vehicle to a needy individual at a significantly below-market price, if the transfer furthers the charitable purpose of helping a poor person in need of a means of transportation.

Notice 2005-44 more specifically provides interim guidance regarding section 884 of the American Jobs Creation Act, which adds sections 170(f)(12) and 6720 to the Internal Revenue Code.  Section 170(f)(12) contains rules for determining the amount that a donor may deduct for a charitable contribution of a qualified vehicle the claimed value of which is more than $500, and related substantiation and information reporting requirements.  Section 6720 imposes penalties on a donee organization that receives a contribution of a qualified vehicle subject to section 170(f)(12) and knowingly furnishes a false or fraudulent acknowledgment of the contribution to the donor, or knowingly fails to furnish the acknowledgment.  Sections 170(f)(12) and 6720 apply to contributions made after December 31, 2004.

The IRS released new Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, which is to be used by donee organizations to report the contribution of qualified vehicles to the IRS under IRC 170(f)(12).  The form may also be used to provide the donor with a contemporaneous written acknowledgment of the contribution.  Instructions for Form 1098-C are available here.