Guide to Donating Your Car Part 2

4. If You Have to Use a Intermediary Agency, Research the Percentage that Gets to Charity

The IRS does not require the car donation agencies to contribute a set amount of the auto's proceeds to the intended charities; that amount is negotiated between the charities and the handlers. Try to find an agency that maximizes that amount, and call the charity to confirm that number before you give. The charities are reluctant to criticize the middlemen, because they don't want to lose the dollars they do receive, but state attorney generals are beginning to investigate and even prosecute these for-profit middlemen, for holding themselves out as charities and misleading the public on the amount that is actually reaching charitable causes.
While many organizations can claim non-profit status, donations to 501 (c) (4) organizations are generally not tax-deductible. These are political organizations with permission to lobby our government; like Disabled American Veterans or the National Rifle Association. Make sure your intended recipient has 501 (c) (3) public charity status.
Some charities will ask you to leave the assignment of ownership space on the charity donation papers blank, so they don't have to re-title the auto. If your charity asks this of you, find another charity. If you don't formally sign your car over to the designated nonprofit, you will be held responsible for any parking tickets that are subsequently incurred, or liable if it's used in a crime. Remember, the charity you give the car to will probably not use your car to deliver meals to the needy, but will simply sell it as quickly as possible. When someone buys it from them at auction and doesn't bother to register that car, it's still yours in the eyes of the law.

5. Make Sure Your Intended Organization is a 501 (c) (3)

6. Transfer the Car Correctly to the Charity

7. Value Your Car Correctly

Due to the proliferation of car donations, the IRS became increasingly concerned about how taxpayers valued the vehicles they donated to charity. Over the last few years, the agency stepped up their audits in this area and began to advocate for changes to the laws that govern such deductions. With the passage of the American Jobs Creation Act of 2004, those changes have come. Starting with your 2005 tax return, you will no longer be able to deduct the published fair market value of vehicles worth more than $500. Under the new rules, your deduction will be determined once your car is sold and the charity sends you a receipt indicating the exact amount your car garnered at auction.