Is My Car Donation Made in Tennessee Tax Deductible?

Eligible Organizations

Since the charity must meet certain criteria before you can claim a deduction for donating a car to it, it's important that you verify that the IRS has granted the organization tax-exempt status. One way to verify this is to access IRS Publication 78. The IRS continuously updates this list with every charity that has tax-exempt status. Alternatively, the charity you have in mind should be able to provide you with confirmation before you even make your donation. Most Tennessee religious organizations such as churches and synagogues are not listed in Publication 78 since they don't receive official tax-exempt status; however, you can still donate your car to them and claim a tax deduction.

After you make your donation and transfer title to the charity, you must wait to receive documentation from the organization before you know the amount of your deduction. This is because your deductible amount is limited to the price the charity sells the car for. Generally, charities have 30 days to get this information to you. However, if it fails to sell the car within a reasonable amount of time, sells it at a reduced price to a needy individual, retains it for its own use or makes significant improvements to the car before selling it, then you are eligible to use the fair market value instead. If one of these exceptions applies to your donation, the charity must still provide you with documentation stating that you qualify to use the car's value as your deduction. Determining the car's market value is your responsibility. In most cases, referencing a reputable used-car price guide is sufficient. However, make sure you only report the private-party prices rather than what dealerships charge.

As of February 2011, for each car donation you claim a deduction of more than $500 for, the IRS requires you to prepare a Form 8283. This form requires details about the types of cars you donate, the name and address of the recipient charities and information on when you initially acquired the cars and the price you paid for them. You must also attach any documentation you receive from the charity to this form and submit everything with your tax return.

Most residents of Tennessee don't pay state income tax on their employment and business earnings like residents of 41 other states do. The state only imposes a tax on the stock dividends and bank interest you earn during the year. As a result, you cannot claim a state deduction for your car donation, even if you pay tax on your interest and dividends.