Get The VFC Tax Advantage
Vehicles for Change (VFC) car donors gain a tax advantage that you can’t get with most charities. To understand why, you need to know that more than 99 percent of U.S. charities use donated cars for revenue only. They send vehicles directly to auction as is, sight unseen. Generally, their donors can deduct the auction selling price.
VFC is different. We’re the only organization in Maryland, Virginia and Washington D.C. that awards donated vehicles to families in need. Because that’s our mission, IRS regulations allow many VFC donors to claim the full fair market value of their car—the maximum permitted by law. But this is just one way a VFC donor can deduct the fair market value.
Inspecting every donation, our seasoned staff determines how to derive the greatest value for VFC families while maximizing the donor’s tax deduction. Donated cars fall into four categories:
1. A vehicle we can recondition for less than $1,000 and will provide at least 24,000 miles or two years of reliable service.
Typically, these cars are less than 10-12 years old and have fewer than 140,000 miles, although some cars are outside of this range.
What we do: Covering all costs, we prepare the car and award it to a qualified low-income family.
VFC tax advantage: Our mission of providing cars for underprivileged families entitles donors to claim the car’s full fair market value under IRS rules.
2. A car that needs a major repair (e.g. new transmission) but is otherwise in great condition.
What we do: Covering all costs, we make major and minor repairs and clean the vehicle to maximize its value. Then, we sell it through Freedom Wheels, our retail used-car business. Proceeds allow us to prepare suitable vehicles for more families.
VFC tax advantage: Because major repairs constitute an improvement, IRS rules permit the donor to claim the car’s full fair market value. This often results in a deduction that’s double the size of what it would have been had the unimproved car gone to auction.
3. A luxury car that’s in good condition.
Because they can be expensive to repair and maintain, VFC doesn’t provide luxury cars to low income families. But if one is in good condition, VFC can still provide the donor with a deduction close or equal to the fair market value.
What we do: We spruce it up and make any minor repairs in order to maximize its value. Then, we sell it through Freedom Wheels, our retail used-car business. All proceeds support VFC’s operations.
VFC tax advantage: Although not considered official improvements, cleaning and minor repairs can boost the value of a car, translating into a higher selling price and bigger deduction. At Freedom Wheels, these cars typically sell for near or more than the fair market value—often double what they would have raised at another nonprofit’s auction. VFC donors may claim the selling price, up to the car’s fair market value.
4. A car that doesn’t meet our reliability standards and wouldn’t be cost-effective to improve.
What we do: After being reviewed by a VFC staff member, this car is spruced up and may receive minor repairs, if necessary, to maximize its value. One of several auction partners is selected to achieve the greatest selling price; in many cases we assign a minimum bid to the car.
VFC tax advantage: Selecting the appropriate auction house, assigning a minimum bid and making minor enhancements can help attain a higher selling price and provide a greater deduction. Donors may claim an amount equal to the sale, up to the car’s fair market value.
Please note: Deductions many vary depending on individual circumstances. Please consult your tax advisor and see the Internal Revenue Service’s “A Donor’s Guide to Vehicle Donations.” Another helpful resource is the IRS’s “Determining the Value of Donated Property.”