Donating a vehicle to a charity is a great way to help those in need. However, tax rules about these donations changed for tax year 2005. You can donate an automobile or boat to a charity as always. If you claim the donation as one of your federal tax deductions, the claimed value is more than $500, and the charity sells the car, your maximum deduction is limited to the amount for which the vehicle sold. In the past, you could claim an amount equal to the fair market value of the vehicle based on comparative sales regardless of whether that amount was lower than, the same as, or more than the amount for which the charity actually sold the vehicle.
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