If you are planning to donate a motor vehicle, boat or airplane to charity, and you estimate it’s worth at least $500, you will need a specific type of contemporaneous, written receipt to file with your tax return.
And if you work for a not-for-profit organization that will receive such donations, you need to provide your donors with this written acknowledgement
Reporting and Substantiation Requirements
The American Jobs Creation Act of 2004 mandated new reporting and substantiation requirements for charitable contributions of motor vehicles, boats, and airplanes valued at more than $500—excluding business-related vehicles in inventory or held for sale. The rules apply to vehicles contributed to charity after 2004.
According to the IRS, the written acknowledgment the donor receives from the charity must include:
name and taxpayer identification number of the donor
vehicle identification number, and
additional information, depending on the use or disposition of the vehicle by the charity.
Deadlines
The acknowledgment must be provided to the donor within 30 days of either
the sale (if the charity sells the vehicle in an arm’s length transaction to an unrelated party), or
the contribution of the vehicle to the donee organization (if the charity certifies that the vehicle won’t be transferred before the completion of “material improvements or significant intervening use,” or the charity certifies that the vehicle will be “transferred to a needy person at a price significantly below fair market value”).
Use of IRS Form 1098-C
The IRS has now released Form 1098-C to be used in satisfying these new requirements.*
The charity must use Copy A of Form 1098-C to report each donation of this type to the IRS, and may also use it to provide a contemporaneous written acknowledgment to the donor. The filing deadline for contributions acknowledged in calendar 2005 is February 28, 2006—or March 31, 2006, if filed electronically.
Electronic copies of Form 1098-C are available on the IRS website.
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*Of course, charities are still required to report and acknowledge contributions with a claimed value of at lest $250 but not more than $500 to the IRS. But they must use a separate acknowledgement, not the 1098-C.
