If you plan to claim a deduction of more than $500 for that vehicle, the IRS rules have changed. You can no longer automatically claim the "fair market value" as you could in the past.

If the charity sold the vehicle you donated, which is what normally happens, you can claim the amount of money they made on that sale. Chances are that's a lot less than the fair market value.

The charity is required to send you a form, within 30 days of the sale, stating the gross proceeds. You need to include that form with your tax return.

There are few situations where you can claim a deduction of more than $500 and use the fair market value of the vehicle:

• If the organization keeps the vehicle for its own use
• If the organization “materially improves” the vehicle
• If the organization sells the vehicle it to a needy individual at well below market price.

In each of these cases, you will need paperwork from the charity stating this.

For More Information:

IRS: Deducting Vehicle Donations

Herb Weisbaum’s Tax Tip Resource Page