When donating a vehicle to charity there are certain IRS rules and regulations that must be followed.

First, for vehicle deductions of more than $500 you are required to attach the charity's acknowledgment of receipt to your return for the year of the donation, even if the vehicle is not sold by the charity during that same year. The charity must provide you with that written acknowledgement within 30 days after the vehicle donation. If you receive the charity's written acknowledgment after filing your tax return for that year, you may file an amended return and claim the deduction on the amended return. In that instance you must attach the acknowledgment to the amended return.

Second, the charity's written acknowledgement form must contain the amount of the gross sales proceeds. It is generally this figure that will be used when determining your deduction amount. Please note however that if the charity significantly uses or materially improves the vehicles, they must certify both the vehicles intended use and duration of that use. If the charity does in fact significantly use or materially improve the vehicle, then you may deduct the vehicle's market value as opposed to the gross sales proceeds amount. If you have any questions about this a quick call to the IRS can help.

As a matter of fact, when attempting to calculate the vehicle's market value you should consult IRS publications 526 - Charitable Deductions and Publication 561, "Determining the Value of Donated Property." Remember that when the IRS is considering a vehicle's fair market value it takes into account more than just the book value of the car. It considers other factors, including the vehicle's condition, which could actually lower the book value of the vehicle.

Third, in order to claim a vehicle donation you must itemize your deductions. The decision to itemize your deductions is usually determined by whether your total itemized deductions are greater than the standard deduction afforded to you for that tax year. Your tax preparer can assist you with determining this. If you prepare your own taxes using tax return software, most software programs have guidelines you can consult.

Fourth, make sure that the organization you are dealing with is a legitimate 501 (c) 3 by calling the IRS customer service hotline at 1-877-829-5500 and requesting Publication 78. Publication 78 is an annual government publication that identifies organizations qualified to receive deductible contributions. Changes made between publications can be found online at
http://www.irs.gov/charities, where this is also a list of eligible organizations not listed in Publication 78 and those organizations that have had their tax deduction status revoked. If you don't have time to wait for Publication 78 to arrive in the mail, the folks at customer service can check an organization's status for you over the phone.

In conclusion, though often complicated, IRS rules and regulations regarding charitable vehicle donations are available for the asking. Remember, the only stupid question is the question you fail to ask. When contemplating a vehicle donation program, be sure to protect yourself from future tax audits and potential scams by asking a lot of questions up front and doing your homework.