Consult the IRS Car Donation Publications to understand guidelines for determining and using fair market value.

Consult the IRS Car Donation Publications to understand guidelines for determining and using fair market value.

When you have a vehicle or vehicles to donate, know when and how to use the legitimate fair market value of the vehicle. Calculating your car donation tax deduction must be done correctly.

According to IRS publication 561, "If you contribute a car, boat, or aircraft to a charitable organization, you must determine its fair market value."

Certain commercial firms and trade organizations publish guides, commonly called "blue books," containing complete dealer sale prices or dealer average prices for recent model years. The guides may be published monthly or seasonally, and for different regions of the country. These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. The prices are not "official" and these publications are not considered an appraisal of any specific donated property. But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area.

"Example: You donate your car to a local high school for use by their students studying automobile repair. Your credit union told you that the "blue book" value of the car is $1,600. However, your car needs extensive repairs and, after some checking, you find that you could sell it for $750. You can deduct $750, the true fair market value of the car, as a charitable contribution."

Note that using fair market value only applies when you donate a car to a charity and the charity retains and uses the vehicle, rather than selling it.