The IRS only allows taxpayers to use the fair market value for a car donation tax deduction, when certain conditions are met. The car donation cannot be worth more than $500 to receive a car donation tax deduction. Or, the car donation has to be used directly by the charity in its programs or services. For example, if a charity uses a car donation for its meals-on-wheels program, the donor may be entitled to claim the car's fair market value as a tax deduction. But the vehicle needs to be in proper condition for the donor to assign fair market value. Be careful. Your used car's value may not be as high as the listing in area pricing guides. High mileage and the vehicle's condition may lower the value. Check with the IRS to learn more on figuring your car donation's value at tax time. Two publications may help: IRS Publication 526, "Charitable Deductions," and IRS Publication 561, "Determining the Value of Donated Property." The guidelines make it easier for taxpayers to follow car donation tax law when giving to charities.


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Be careful to follow car donation IRS rules when claiming a car donation tax deduction. They changed in 2005 to end abuses in the popular practice of giving used and unwanted cars to charities. If you are confused or unsure of the car donation IRS rules, it is best to contact an accountant or the IRS for information. The IRS runs a compliance program for noncash donations, such as car donations to charities. The program compares the amount a charity gets for selling a donated car with the amount the taxpayer claimed. If the IRS has questions, it will launch a review of the car donation. Several IRS guides outline the car donation tax rules. They are: * Publication 526, "Charitable Contributions"; * Publication 557, "Tax-Exempt Status for Your Organization"; * Publication 561, "Determining the Value of Donated Property"; * Publication 1771, "Charitable Contributions -- Substantiation and Disclosure Requirements"; Publication 4302, "A Charity's Guide to Vehicle Donations."


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Be prepared to itemize your car donation tax deduction when filing your taxes. Most Americans do not itemize on their taxes, so it is not a routine practice for them. But in order to get a car donation tax deduction, you must take the extra step. If you are unsure how to itemize, it's a good idea to seek help from an accountant. Car donation IRS rules require that donors fill out Form 1040, Schedule A. There may be other forms and documentation required, depending on the value of the car donation. The IRS also wants donors to keep records on how they calculated the car donation tax deduction. The IRS, for example, requires that cars valued at $500 or less be deducted at no more than "fair market value." The value you assign the car cannot be more than the sales prices listed in a used vehicle pricing guide, such as the Kelley Blue Book. Donors must also consider the vehicle's condition and mileage when setting the value for a car donation. When the car donation is valued at more than $500, the amount of the car donation tax deduction depends on how the charity uses the gift. If you want more detailed information, the IRS offers free materials. Go to www.irs.gov, or phone, toll free, 1-800-829-3676.


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When claiming a car donation tax deduction, the IRS lets taxpayers use the vehicle's fair market value, provided certain conditions are met. Taxpayers may want to consult an accountant on car donation IRS rules before claiming a car donation at fair market value. The IRS offers the following guidelines: * It may allow a tax deduction for the car's fair market value if the recipient organization "makes significant intervening use of the vehicle," or if the recipient makes major improvements to the vehicle. * The IRS may accept a deduction of fair market value, if the charitable organization gives away the car for free, or sells it at a much lower price, to help "the poor and distressed or underprivileged." * Finally, the IRS may accept a car donation tax deduction for fair market value if the claimed deduction is $500 or less. The IRS offers guidance in determining whether you can deduct a car's fair market value when making a car donation to a charity. Call, toll free, 1-800-TAX-FORM, or go online to IRS.gov, then click on the link for Publication 526, "Charitable Deductions."


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