Used Cars

• Commonly, taxpayers donate their used vehicles to charity when they purchase a new car. The IRS has special requirements you must adhere to when donating vehicles. If you claim more than a $500 deduction for the car, you can only deduct the smaller of its fair market value at the time of donation or the proceeds the charity obtains when it sells it. This requires you to attach Form 1098-C to your tax return. After the charity sells your car, it will send you this form to report the sales price it was able to obtain. Although you still must attach the form to your tax return, you need not use the sales price as your deduction amount if the charity offers the vehicle to a needy individual at a discount.
  
  

Cash

• If you make a cash contribution of $250 or more, the IRS requires you to obtain a written acknowledgment from the charity stating the amount of cash it received, the goods or services it gave you in return and a statement that you received no other benefit for the donation. In addition, you must also retain some proof of the transaction, such as a bank statement or canceled check for any cash contribution, regardless of amount. One thing to remember is that the written acknowledgment only applies to individual contributions of $250 or more. For example, this rule does not apply if you make a $25 donation to your church each week even though the total for the year is more than $250.
  
  

Property

• The rules vary for property donations, depending on your property's value. For donations of property in which you claim a deduction between $250 and $500, you must obtain the same written acknowledgment as for cash contributions of $250 or more. If the deduction is more than $500 but not over $5,000, then you must also retain, but not submit to the IRS, details on how and when you acquired the property and the amount you paid for it. For property donations in excess of $5,000, you must obtain a written appraisal of the property's value.
  
  

Form 8283

• You will need to prepare IRS Form 8283 and attach it to your return to report each separate property donation you make for which you claim a deduction of more than $500. Keep in mind that each of the above requirements is only the proof that you must retain. Do not submit any of those documents unless the tax form's instructions specifically require you to do so.