DONOR ALERTS:

Donors need to be extremely careful when donating to a program that claims to offer fair market deductions as each individual vehicle is examined to determine the tax status of the vehicle. The IRS has issued a warning about questionable deductions for donated vehicles (Link to IRS article here.) The V-DAC program does not do any questionable activities and the program structure is designed to protect the donor, the donor's deduction and the benefiting charity.

The IRS has stated that donations made in 2005 but sold in 2006 must be deducted from 2005 taxes. Tax receipts for donated vehicles can only be issued after the vehicle is sold. If the tax receipt is received after the donor has filed taxes, they can file a revised return. Link to IRS article is here.

You are entitled to receive a Tax Deduction equal to what the vehicle is sold for by the charity if you itemize your deductions. If the vehicle is sold for less than $500, you can deduct the fair market value up to $500. You will receive a tax receipt stating what your vehicle sold for within a few days of the sale of your vehicle. Call the toll free donation number if you need another copy of this receipt.

The American Jobs Creation Act gave tax cuts to business and paid for it in part by increasing taxes to individuals by $2.4 billion through restrictions on the ability of donors to receive the private party sale (fair market) value of a donated vehicle. Donations made to this and most other vehicle donation programs are now being valued at what the vehicle is sold for or a maximum fair market value of $500 if sold for less than $500. As most donated vehicles are sold at wholesale, this has resulted in decreases of up to 40% in vehicle donations, irreparably harming many charities while achieving the anticipated increase in individual taxes.

There are a few restricted exceptions that allow donors to claim fair market value for their donation but the Treasury Department and the IRS has significantly narrowed these exemptions by their guidance and further ruled that some donations taken under these exceptions will not be allowed . According to the IRS, 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.

IRS Vehicle Donation Publication Links:

* It is solely your responsibility to accurately report vehicle value and your tax status. See you tax advisor to determine your particular tax situation.