Selecting a Charity

• Not every charity organization that will accept your vehicle is an IRS "qualified organization." When choosing a charity, be sure that it operates as a nonprofit and is only involved in religious, educational, charitable, scientific, literary or humanitarian causes. This information is available in IRS Publication 78 (see "Resources").
  
  

Fair Market Value

• After determining which charity will receive your vehicle, the IRS requires you to use a reputable used-car price guide that provides multiple values for cars based on make, model, year, mileage and body and mechanical condition. Only reference the price for sales between private parties --- the IRS will not allow you to claim a deduction for the price that a car dealership would sell the vehicle for.
  
  

Written Acknowledgment

• As of February 2011, when your vehicle's value is more than $500 you must obtain a written acknowledgment of your donation from the charity. You don't always need to submit this with your tax return, but if the IRS asks for it, you can lose your deduction by not having it. The acknowledgment is a simple document or receipt, but must include your name, Social Security number, the date of your donation and a statement that the charity did not provide you with any goods or services in exchange for the vehicle. However, if you do receive something of value from the charity, you must reduce your deduction by its value. Hold onto this document for at least three years from the due date of your tax return. This is the amount of time the IRS has to audit your return, and in the event it does, the written acknowledgment is your proof.
  
  

Deduction Limit

• For most vehicle donations, the actual deduction may be less than the car's fair market value. This occurs when the charity sells the vehicle instead of using it. Once it sells your car, it will send you a Form 1098-C indicating the gross proceeds of the sale. Unless the charity purposely sold the vehicle at a discount to a needy individual, you can only claim a deduction that is the lesser of the vehicle's value on the date of your donation or the gross proceeds from the sale.