8065 / What verification is required to substantiate a deduction for a charitable contribution of a qualified vehicle with a value of more than $500?

General

No deduction is allowed for a contribution of a “qualified vehicle” with a claimed value of more than $500 unless:

(1)  the taxpayer substantiates the contribution by a “contemporaneous” written acknowledgement of the contribution by the charity that meets certain requirements, and includes the acknowledgement with the tax return that includes the deduction; and

(2)  if the charity sells the vehicle without any “significant intervening use or material improvement” of the vehicle by the charity, the amount of the deduction does not exceed the gross proceeds received from the sale (“gross proceeds limitation”).¹

Note that the substantiation rules under IRC Section 170(f)(8)—applicable to contributions of more than $250 (see 8058)—do not apply to a contribution described above.²

The acknowledgment must include the following information:

(A)  the name and taxpayer identification number of the donor;

(B)  the vehicle identification number (or similar number);

(C)  in the case of a “qualified vehicle” to which (2), above, applies: (i) a certification that the vehicle was sold in an arm’s length transaction between unrelated parties; (ii) the gross proceeds from the sale; and (iii) a statement that the deductible amount may not exceed the amount of such gross proceeds;

(D)  in the case of a “qualified vehicle” to which (2), above, does not apply: (i) a certification of the intended use or material improvement of the vehicle and the intended duration of such use; and (ii) a certification that the vehicle would not be transferred in exchange for money, other property, or services before completion of the use or improvement;

(E)  whether the donee organization provided any goods or services in consideration, in whole or in part, for the qualified vehicle; and

(F)  a description and good faith estimate of the value of any goods or services referred to in (E), above, or if such goods or services consist solely of intangible religious benefits, a statement to that effect.³

An acknowledgement is considered “contemporaneous” if the charity provides it within 30 days of the sale of the qualified vehicle, or in the case of an acknowledgement including a certification as described in (D), above, the contribution of the qualified vehicle.⁴

The term “qualified vehicle” means any motor vehicle manufactured primarily for use on public streets, roads, and highways, or a boat or airplane. But the term does not include any property described in IRC Section 1221(a)(1) (i.e., inventory).⁵

A charity is required to provide an acknowledgement containing the required information to the Secretary. The information must be provided at the time and in the manner prescribed by the Secretary.⁶ A charity that knowingly furnishes a false or fraudulent acknowledgment, or that knowingly fails to furnish such an acknowledgment in the manner, at the time, and showing the required information (see above), will be subject to a penalty.⁷

The Secretary will prescribe such regulations or other guidance (see below) as may be necessary to carry out the purposes of these requirements. In addition, the Secretary may prescribe regulations or other guidance that exempt sales of vehicles by the charity that are in direct furtherance of the charity’s charitable purposes from the requirements that (1) the donor may not deduct an amount in excess of the gross proceeds from the sale, and (2) the charity certify that the vehicle will not be transferred in exchange for money, other property, or services before completion of a significant use or material improvement by the charity.⁸ The Conference Committee conferees intend that such guidance may be appropriate, for example, if an organization directly furthers its charitable purposes by selling automobiles to needy persons at a price significantly below fair market below. The conferees further intend that the Service strictly construe the requirement of “significant use or material improvement.”⁹

Charities should report the contribution of qualified vehicles on IRS Form 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes). Form 1098-C may also be used to provide the donor with a contemporaneous written acknowledgement of the contribution.

Interim Guidance on Qualified Vehicle Contributions

The Service has provided interim guidance regarding charitable contributions of qualified vehicles.¹⁰  The guidance is generally effective for contributions made after 2004. The rules stated below apply until regulations become effective.

Other Guidance

The Service has released a series of questions and answers concerning the new rules for vehicle donations.¹¹ In addition, the Service has provided information reporting guidance to donee organizations that receive contributions of certain motor vehicles, boats, and airplanes.¹² For additional information on vehicle donations, see Publication 4303, A Donor’s Guide to Vehicle Donations, and Publication 4302, A Charity’s Guide to Vehicle Donations.

The Service has announced its awareness of questionable practices involving charities selling donated vehicles at auction price, but claiming that the sales were to needy individuals at prices significantly below fair market value. By so doing, these charities have claimed that the sales trigger an exception to the general rule that the deduction allowed to the donor is limited to the proceeds from the charity’s sale. The Service’s position is that vehicles sold at auction are not sold at prices significantly below fair market value. Therefore, the Service will not treat vehicles sold at auction as qualifying for the exception for sales to needy individuals at prices below fair market value.¹³

The charity does not need to sell the vehicle in 2026, for example, in order for the donor who donated the vehicle in 2026 to receive a deduction for 2026. 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. 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.¹⁴