The American Jobs Creation Act of 2004 changed the rules for claiming a charitable contribution deduction for donations of used vehicles to charity. The new rules took effect this year. It is important for church treasurers to be familiar with the new rules for two reasons. First, churches have reporting requirements that must be followed; and second, church treasurers need to be ready to explain the rules to members who indicate an interest in donating a car to the church.
The charity sells the donated car with no significant use or material improvement
Beginning in 2005, if the claimed value of a donated car exceeds $500 and the car is sold by the charity, the donor's charitable contribution deduction is limited to the gross proceeds from the sale. Prior to 2005 taxpayers could deduct the fair market value of a donated car. Under the new rules, the charity must:
(1) provide the donor with ...