How Do Purple Heart Tax Deductions Work?

Qualifying Charity

The Purple Heart is a non-profit organization that provides assistance to veterans of the U.S. military. Funds are raised through the donations of vehicles from people who wish to support this worthy cause. Each year thousands of taxpayers receive a tax deduction for a used car donation. Proceeds go toward programs for the nation's veterans and their families, including dependents and widows. Donations of vehicles made to the Purple Heart are tax deductible. Donors receive a receipt for their donation, along with the paperwork necessary for the IRS qualifying the fair market value of the donated vehicle for a federal tax deduction.

Amount of Deduction

IRS law states that a donor must receive a receipt for the donated vehicle within 30 days of making the donation in order to qualify for a tax deduction. Tax deductions are based on the value of the vehicle and are often more than a donor might receive trading in the vehicle at a dealership. The fair market value of a vehicle can be determined by using the Kelly Blue Book. Donors may deduct up to $500 or the sale price, whichever is greater, on their federal tax return. For vehicles valued at more than $500, taxpayers may deduct the total of what the Purple Heart receives when selling the vehicle. The fair market value of a donated vehicle may not be estimated for more than $500 at the time that the vehicle is donated; however, a taxpayer may deduct the full market value after the charity actually sells the vehicle. The value of a donated vehicle may not exceed the amount that the Purple Heart receives for the vehicle at the time of sale.

Donating a Vehicle

Cars are not the only type of vehicles, which can be donated. Other kinds of transportation vehicles may be accepted as well. Some chapters of the Purple Heart may also consider donations of motorcycles, trucks, RVs, aircraft and boats. In some cases, certain farm equipment may be accepted for resale by the charity. People interested in making a donation can go to the organization's website and complete the online donation form, or contact the Purple Heart toll free at (888) 414-4483 (see Resources below).

Arranging for Pick Up

Vehicles to be donated can be driven to one of the organization's donor centers, or donors can arrange for the vehicle to be picked up. If the vehicle cannot be driven to one of the Purple Heart's donation facilities, a registered towing company that works with the Purple heart will contact you to arrange a date and time for the vehicle to be picked up. At the time of pick up, the towing company provides a donor with a receipt indicating that the vehicle has been picked up on behalf of the Purple Heart. Donors must have the keys and title to the vehicle ready at the time of pick up. The vehicle's title must be clear, and free of all liens. If a vehicle needs to be picked up, the cost of towing may be deducted from the donation. Once a vehicle has been picked up, the Purple Heart will mail the donor a receipt within 10 business days.

About the Author

Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.