The maximum amount you can deduct on your income tax return is the fair
market value of your car. Fair market value is the price a willing buyer
would pay and a willing seller would accept for the car, when neither
party is compelled to buy or sell, and both parties have reasonable
knowledge of the relevant facts. Some fundraisers have mistakenly
claimed that donors can, in all cases, deduct the full value of their
cars as found in a used car guide (such as “blue book” value). A used
car guide may be a good starting point to value your car, but you should
exercise caution. The IRS will only allow a deduction for the fair
market value of the car, which may be substantially less than the “blue
book” value. Example: You donate your car to the local high school for
use by students studying car repair. Your credit union representative
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 only sell your car for $750. Your charitable contribution
deduction may not exceed $750, the fair market value of the car. For
information on determining the value of your car, see Publication 561,
Determining the Value of Donated Property. If you used your car in a
trade or business, see the rules for contributions of capital gain
property in Publication 526.