The IRS has tightened several laws that you should be aware of that are efectively immediately – that means your 2008 tax returns due by April 15, 2009.

Prior to 2005, taxpayers who donated a vehicle were allowed to deduct its fair market value. However, the IRS changes regarding vehicle donations means that you will not be able to put the amount that “you value” your car on the tax return for a deduction. Written acknowledgements from the charitable organization for any donation over $500 are required.

Congress was concerned that people were inflating the value of donated cars under the former system. Claiming full blue book value for vehicles that had been turned down by the local junkyard is currently a thing of the past.

What IRS reported to Congress was that the charities that received the donated cars could not in some cases GIVE them away. Further, it was chronicled that subsequent to the law change donated cars decreased by 80 percent.

So if you still want to give your vehicle to a charity and use it as a charitable contribution, here is what you need to do:

Before you give your vehicle to a charitable organization:

• check out the charity
• see if you’ll get a tax benefit
• check the value of your vehicle
• see what your responsibilities are as a donor to a charity

Check Out The Charity
Make certain you are donating to a qualified organization. The most common are 501(c)(3) organizations, such as charitable, educational or religious organizations. To verify, refer to IRS Publication 78, Cumulative List of Organizations or call (877) 829-5500. Please note that churches, synagogues, temples and mosques are not required to apply to the IRS for recognition – so calling may be your best option.

Qualifying For A Deduction
You must take itemized (no standard deduction) deductions on your Schedule A of Form 1040.
You must attach Copy B of Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, to your income tax return in order to take a deduction for the contribution of a qualified vehicle with a value of more than $500.

Determining The Amount You Can Deduct
A qualified vehicle is any motor vehicle manufactured primarily for use on public streets, roads and highways. They also could be a boat or an airplane.

Generally, the amount you may deduct for a vehicle contribution depends upon what the charity does with the vehicle as reported in the written acknowledgement you received from the charity. If the charity sells the vehicle, generally your deduction is limited to the gross proceeds from the sale.

If the value of the vehicle is less than $500 you can claim a deduction for the lesser of the vehicle’s fair market value or $500 – but you need to provide written acknowledgement from the charity that complies with the requirements described

If the vehicle contribution deduction is more than $500 you need a written acknowledgement from the charity with the following information contained in it:

• Your name and taxpayer identification number
• the Vehicle Identification Number
• the date of the contribution
• and one of the following
  • a statement that no goods or services were provided by the charity in return for the donation OR
  • a description and good faith estimate of the value of goods and services OR
  • a statement that goods or services provided by the charity consisted entirely of intangible religious benefits

If the charity sold the vehicle, the acknowledgement must contain proof by providing a statement of such, the date the vehicle was sold and the gross proceeds from the sale. There are some exceptions.

If the acknowledgement does not contain all required information, the deduction cannot exceed $500

You need the acknowledgement dated before the date of your return

If you are claiming at least $250 and not more than $500 you need the acknowledgement to include:

• the name of the charity
• a description of your vehicle and one of the following
• and one of the following
  • a statement that no goods or services were provided by the charity in return for the donation OR
  • a description and good faith estimate of the value of goods and services OR
  • a statement that goods or services provided by the charity consisted entirely of intangible religious benefits

You need the acknowledgement dated before the date of your return

One more thing …
Make sure you attach the written acknowledgement to your tax return