Many congregations sell donated vehicles in fund raising activities. The Internal Revenue Services has issued guidelines for churches and donors to follow in order to qualify these donations as tax deductible.

If a congregation or mission center receives a car donation with a value of more than $500 or which generates proceeds of more than $500, the deduction is determined in one of two ways.

1. If the car is sold without any "significant intervening use" or "material improvement" by the charity, the deduction is limited to the amount the congregation receives from the sale.
2. If the charity intends to make "significant intervening use" of or "materially improve" the car, the donor generally can deduct its fair market value.

[For example: many donated cars are repaired or restored by high school automobile repair programs. The value enhanced vehicle is then sold at charity auction.]

“Significant intervening use” means the congregation must actually use the car for some period of time to substantially further its regularly conducted activities, and the use must be considerable. There is no significant intervening use if the charity's use is incidental or not intended at the time of the contribution.

“Material improvement” means major repairs or improvements that result in a significant increase in the car's value. Cleaning, minor repairs, and routine maintenance are not material improvements.

The acknowledgement must include:

• the individual's name and taxpayer identification number,
• the vehicle identification number, and
• a statement certifying that the car was sold in an arm's length transaction between unrelated parties, the gross proceeds received from the sale, and a statement that the donor may not deduct more than the gross proceeds from the sale, or
• if the charity intends a significant intervening use, a statement certifying the intended significant intervening use, the duration of that use, and that the charity will not sell the car before completion of that use, or
• if the charity intends to make a material improvement to the car, a statement certifying the intended material improvement and that the charity will not sell the car before completion of the improvement.