Here's an interesting article on donating used cars:
Does Charity Car Donation Still Make Sense Under Tougher IRS Rules?
So in 2005, the IRS changed the rule. From then on, if your car is valued at more than $500, the deduction is limited to the charity's actual selling price. The donor must attach a statement of sale to the tax return in order to receive the deduction. (The charity is obligated to provide the statement within 30 days.) You are not entitled to know the deduction amount before donating your car.
That leaves most donors in the dark and may leave some businesses and charities in the red.
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Since the biggest loss for consumers is for those who own higher-value used cars, should they give up hope of donating? Not at all. Although the IRS has closed the loophole in the law, there is still a way to deduct full market value of your vehicle: If the charity uses the car itself to further its specific purpose.
For example, the nonprofit organization 1-800-Charity Cars refurbishes donated cars and provides them directly to the economically disadvantaged. Its goal is to help the needy and welfare-dependent to become stable, self-sufficient, tax-paying citizens.
"We've been going gangbusters," said CEO Brian Menzies. "We've given away cars for free to people in almost every state in the union, including Alaska and Hawaii."
In contrast to charities whose actual mission doesn't involve cars, Charity Cars has seen a 50-percent increase in donations this year. Because owners of higher-value used cars are now turning to his organization, Menzies says, "The quality of the cars has been phenomenal." Cars that aren't roadworthy are auctioned off to pay for repairing the cars that go to struggling families.
Note that the fair market value, in this case, must be determined by the donor. The government warns that, "The fair market value of the taxpayer's car may be substantially different from the 'Blue Book' value." Lower, that is. Edmunds' TMV Used Vehicle Appraiser provides an accurate valuation report of what a used car sells for in your specific neighborhood. This can be used at tax time and in the event of an audit.
