Beginning January 1st, 2005, when a taxpayer donates a vehicle for which the claimed value is $500 or more, the precise deduction he can claim will depend on how the charity plans to use the vehicle. If the auto is sold by the nonprofit, the taxpaer will be able to deduct only the amount of gross proceeds from the sale.

 

BUT, if the nonprofit donates the vehicle and does not receive any cash in return, such as IHN, the donor may deduct the fair market value of the vehicle.

 

The IRS has issued new guidance for car donors, "Publication 4303-A Donor's Guide to Car Donation."