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Rules for making car donations have gotten tougher since 2005 for good reason.
Prior to 2005, there were increasing reports of abuse in the growing industry of car donation programs to benefit charities.
These abuses included donors taking tax write-offs for donated vehicles at inflated prices. There also were reports of companies and individuals posing as legitimate charities to personally gain from vehicle donations.
But new IRS rules make it harder for abusers to flout the system. It is now up to donors to make sure they are making car donations to registered charities. Some states offer free guides or help to donors who want to check the status of charities and car donation programs.
When donating cars valued at $500 or less, you cannot claim more than the fair market value, or the sales price found in a used car pricing guide. The car's condition and mileage needs to be factored in as well.
For cars valued at more than $500, your tax write-off must be the amount that the charity got reselling the vehicle.
Donors are required to document with the IRS the transfer of the vehicle to a registered charity. Check with an accountant for the required forms. Many of the forms are available online.