Charitable Contributions of Motor Vehicles, Boats & Aircraft for Tax Year 2005

Beginning January 1, 2005, if you donate a motor vehicle, boat, or aircraft to a qualified organization, your deduction is limited to the gross proceeds from its sale by the organization. This rule applies if the claimed value of the motor vehicle, boat, or aircraft is MORE THAN $500. However, if the organization makes significant intervening use of or materially improves the motor vehicle, boat, or aircraft, you generally can deduct its fair market value.

Written Acknowledgement Required

If the claimed value of the donation is MORE THAN $500, you must have a written acknowledgement (Form 1098-C) of your donation from the organization and must attach it to your return. If you do not have written acknowledgement, you CANNOT deduct your contribution!

The written acknowledgement MUST include the following information:

1. Your name and taxpayer identification number,

2. Vehicle identification number (VIN) or similar number,

3. Statement certifying the motor vehicle, boat, or aircraft was sold in an arm's length transaction between unrelated parties,

4. Gross sales proceeds,

5. Statement that your deduction may not be more than the gross sales proceeds, AND

6. Date of the contribution.

However, if there was significant intervening use of or material improvement to the motor vehicle, boat, or aircraft by the organization, the written acknowledgement does not have to include information in items 3, 4, and 5 above. Instead, it must contain a certification of the intended use of or material improvement to the motor vehicle, boat, or aircraft and the intended duration of that use and a certification that the motor vehicle, boat, or aircraft will not be transferred in exchange for money, other property, or services before completion of that use or improvement.

This written acknowledgement must be provided within 30 days of the sale of the motor vehicle, boat, or aircraft. If there is significant intervening use or material improvement of the motor vehicle, boat, or aircraft by the organization, the written acknowledgement must be provided within 30 days of the contribution. The organization also must provide this information to the IRS.

These rules also apply to donations of boats, aircraft, and any vehicle manufactured mainly for use on public streets, roads, and highways.

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