Editor's Note: This article is part of our 2014 Tax Tips series. Robert Flach is an expert with more than 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
NEW YORK (MainStreet) The rules are different for donating a vehicle to charity. The amount of your deduction will depend on what the charity does with your car.
If the charity sells the car at auction your tax deduction is the price the car sold for at the auction.
If the charity uses the car in its operations, makes "material" improvements to the car before selling it, or either gives the car away or sells it at a significantly reduced price, your deduction is the "fair market value" of the car on the date you made the contribution.
You can find the "fair market value" of the car by using the "What's my current car worth?" calculator at the Kelly Blue Book website.
The charity will give you a Form 1098-C that tells what was done with the car and, if sold at auction, identifies the deductible sale proceeds. You must include Copy B of this form with the filing of your 1040. The charity can give you a statement in lieu of Form 1098-C as long as it contains all the necessary information. The 1098-C, or substitute statement, must be issued within 30 days of either the date of the contribution or the date the car was sold.