Fair Market Value

• The IRS requires the taxpayer who donates the vehicle to assess its fair-market value when calculating the amount of the charitable contribution deduction. The government requires you to reference a reputable used-vehicle price guide when making the assessment. A reputable guide will report the different values for a car based on its make, model, year, accumulated mileage and condition. When you reference the guide, you must use the private-party price guidelines. The IRS will not accept a valuation using used-car dealership prices. Most importantly, if the car is not operational, you must use the value for a vehicle in poor condition if it accurately reflects a car that does not run.
  
  

Appraisal

• If the price guide does not provide an accurate valuation for a vehicle that does not drive, you can employ the services of a qualified appraiser to evaluate its worth. The appraisal must take into account the cost a charitable organization will incur to restore the car to running condition. However, if the repair costs exceed the salvage value of the car, you must use the lower salvage value to calculate the deduction. The fee you pay to obtain an appraisal is deductible as a miscellaneous itemized deduction. The IRS forbids taxpayers from adding the cost to the vehicle's value.
  
  

Evidence

• If you determine that the deduction does not exceed $500, the IRS requires you to use the lower of $500 or the car's fair market value. However, if you intend on taking a deduction in excess of $500, the deductible amount to use is the smaller of the vehicle's fair market value on the date of contribution or the gross proceeds the charity receives when it sells the car. Charitable organizations must provide car donors a Form 1098-C that lists the gross proceeds of the sale. You must attach this form to your tax return to take the deduction. If the charity makes improvements to the car to restore it to a good running condition, the IRS does not require you to reference the sales price when calculating the charitable deduction.
  
  

Charitable Organization

• Taxpayers who determine that the car has an ascertainable value without being in running condition must ensure they donate the car to an IRS-qualified organization. A qualified organization is any non-profit entity organized under the laws of the United States and its possessions that operates for religious, educational, literary, humanitarian, scientific or charitable purposes. Donations made to other organizations are not deductible.