Contributions of Motor Vehicles, Boats, and Airplanes

Congress has provided special rules related to the contributions of motor vehicles, boats, and airplanes. The gifts of these items may not occur frequently, but when one of these donations is received, your ministry needs to be prepared to properly apply the rules in compliance with the law.

Deduction limits. The amount of the charitable deduction is limited to the ministry’s gross proceeds from the sale, if there’s no significant intervening use or material improvement and unless the donated vehicle is given or sold at a low price to needy individuals.

If the vehicle is sold without any significant intervening use or material improvement, then the giver’s charitable deduction cannot exceed the ministry’s gross proceeds from the sale. There is significant intervening use if the ministry actually uses the vehicle to substantially further its regularly conducted activities, and the use is significant.

The gross proceeds limitation also does not apply if the ministry gives a vehicle (or sells it at a price significantly below its fair market value) to a needy individual.

Fair market value. If the gross proceeds limitation does not apply, then the amount of the giver’s charitable deduction for the contribution of a vehicle cannot be more than the vehicle’s fair market value.

The fair market value of the vehicle may be determined by using an established used-vehicle pricing guide (e.g., a Blue Book type reference). However, such a pricing guide may be used only if it lists a sales price for a vehicle that:

  • Is the same make, model, and year;
  • Is sold in the same area, in the same condition, with the same or substantially similar options or accessories; and,
  • Is sold with the same or substantially similar warranties or guarantees as the donated vehicle.

Dealer retail value cannot be used to determine the fair market value of a vehicle.

Proof required. Under the law, ministries are required to provide a contemporaneous written acknowledgment of the contribution to the giver containing the same information shown on Form 1098-C. Otherwise, the giver cannot claim a deduction for that vehicle. Copy B of Form 1098-C may be used for this purpose.

An acknowledgment is considered contemporaneous if it is furnished to the giver no later than 30 days after the:

  • Date of the sale, if the ministry is required to check box 4a on Form 1098-C, or
  • Date of contribution, if the ministry is required to check box 5a or 5b on
    Form 1098-C.

The ministry should provide Copies B and C of Form 1098-C to the donor. File Copy A with the Internal Revenue Service by the required filing date as specified by the IRS.

Taxpayers are required to attach Copy B of Form 1098-C to their federal tax return to take a charitable deduction for the contribution; Copy C is for the donor’s files. Copy D is for the ministry’s files.

Vehicle sold before use or improvement. If the donated vehicle is sold before significant intervening use or material improvement by the organization, the gross proceeds received by the ministry from the sale of the vehicle will be included on the written acknowledgment. Therefore, for donated vehicles sold before significant use or material improvement, the deductible amount is the gross proceeds received from the sale.

To meet the significant use test, a ministry must actually use the vehicle to substantially further the ministry’s regularly conducted activities and the use must be significant. Whether a use is considered significant depends on the frequency and duration of use.

Material improvement includes a major repair or improvement that improves the vehicle’s condition in a way that significantly increases its value. Cleaning, minor repairs, painting, rust-proofing, removal of dents and scratching, cleaning or repair of upholstery, waxing, and installation of anti-theft devices are not material improvements to the vehicle.

The acknowledgment must contain the name and taxpayer identification number of the giver and the vehicle identification number (or similar number) of the vehicle. If the ministry sells the vehicle without performing a significant intervening use or material improvement, and it isn’t given (or sold in a bargain sale) to a needy individual, the acknowledgment also must also state:

  • That the vehicle was sold in an arm’s length transaction between unrelated parties;
  • The amount of the gross proceeds from the sale: and,
  • That the giver’s deductible amount may not be more than the gross proceeds.

Vehicle not sold before use or improvement. Ministries may plan to significantly use or materially improve a donated vehicle before or instead of selling the vehicle. In such circumstances, the ministry would not include a dollar amount in the written acknowledgment. Instead, the written acknowledgment (written within 30 days of the contribution of the vehicle to be considered contemporaneous) should include the following information:

  • the name and taxpayer identification number of the giver,
  • the vehicle identification number or similar number,
  • certification of the intended use or material improvement of the vehicle and the intended duration of such use, and
  • certification that the vehicle would not be transferred in exchange for money, other property, or services before completion of such use or improvement.

The deductible amount for contributed vehicles that will be used or improved by the ministry is the private-party value of the vehicle, as determined by the giver.

Vehicle gratuitously transferred to a needy individual. Contributions of vehicles that are sold by the ministry at a price significantly below fair market value (or gratuitously transferred to needy individuals in direct furtherance of the ministry’s charitable purpose) qualify for a charitable deduction at the private-party value of the property.

For a vehicle that meets this definition, the gift acknowledgment also must contain a certification that the ministry will sell the qualified vehicle to a needy individual at a price significantly below fair market value (or, if applicable, that the ministry will gratuitously transfer the qualified vehicle to a needy individual) and that the sale (or transfer) will be in the direct furtherance of the ministry’s charitable purpose of relieving the poor and distressed or the underprivileged who are in need of a means of transportation.

Example:  On October 1, 20XX, a giver contributes a qualified vehicle to a qualified ministry. The ministry’s charitable purposes include helping needy individuals who are unemployed develop new job skills, finding job placements for these individuals, and providing transportation for these individuals who need a means of transportation to jobs in areas not served by public transportation. The ministry determines that, in direct furtherance of its charitable purpose, the ministry will sell the qualified vehicle at a price significantly below fair market value to a trainee who needs a means of transportation to a new workplace.

On or before October 31, 20XX, the ministry provides an acknowledgment to the giver containing the giver’s name and taxpayer identification number, the vehicle identification number, a statement that the date of the contribution was October 1, 20XX, a certification that the ministry will sell the qualified vehicle to a needy individual at a price significantly below fair market value, and a certification that the sale is in direct furtherance of the ministry’s charitable purpose.

See IRS Publication 4302, A Charity’s Guide to Vehicle Donation, for more information.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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