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Every year, several hundred thousand Americans donate the fair market value of their old cars (and even boats and planes) to charitable organizations for the tax deduction.

In 2000, the average deduction was $892, keeping $654 million from government coffers.

Because of this lost revenue and rampant abuse of the deduction, 2005 tax law changes have tightened things up. Now, you can only deduct the amount that the charity gets for your car after the clunker is sold. (Previously, you could determine the fair market value as long as you could substantiate it.) The charity is required to let you know this amount 30 days after the sale.

If the fair market value of your car is less than or up to $500, however, you can still deduct the full amount.

Property donations of more than $5,000 need to be appraised first.

As always, do your due diligence before giving up your former auto.

Find out exactly whom you are dealing with. Always talk with an employee of the charity. Ask what percentage of the proceeds actually goes to the charity. Many nonprofits outsource the sale of vehicles to a wholesaler or an auctioneer, and the cost of this can limit the amount that the charity will actually receive—and, by extension, the value of your donation.

A good rule of thumb is to donate your car only if the program contributes at least 70 percent of its proceeds to charity. If you’re talking to a middleman, ask him what percentage he collects and contact the charity directly to confirm that you’ve been given the right information.

Get specifics. While there are many legitimate programs out there, there are also a lot of scams, too. Any legitimate donation program should be willing to provide information regarding the specific charity to which its proceeds are actually donated. As such, do not donate your vehicle to any organization that says it donates proceeds to “charity” but refuses to specify which one.

Be present for the transfer. If the charity or intermediary asks you to leave the keys and the title in the unlocked vehicle for it to be picked up, do not do it! You may have your car stolen, and without a valid title, you will have little legal recourse.

Should You Donate Your Old Car?