Terry donated a car to a qualified charitable organization. She purchased the car in 2014 for $27,500. The fair market value of the car when she donated it was $3,750. The charitable organization immediately sold the car for $3,000. They did not significantly use or make any improvements to it. The organization provided Terry with a Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes.

Question

How much can Terry deduct as a charitable contribution on her Schedule A (Form 1040), Itemized Deductions?

Answer 1

When a taxpayer donates a car to a qualified charitable organization, the deduction is generally based on the fair market value (FMV) of the vehicle at the time of the donation. However, there are specific rules to follow when the vehicle is sold by the charity without significant use or improvement.

In Terry's case, since the charity sold the car for $3,000 and did not significantly use or improve the vehicle, the deduction is limited to the gross proceeds received from the sale. According to IRS rules, when a donated vehicle is sold by the charity without significant use or material improvement, the donor (Terry) can only deduct the amount that the organization received from the sale.

Given that the charitable organization sold the car for $3,000, this is the amount Terry can deduct as a charitable contribution on her Schedule A (Form 1040).

Conclusion: Terry can deduct $3,000 as a charitable contribution.