If you donated a car or other vehicle to a qualified charitable organization in 2006 and intend to claim a deduction you should review the special rules that apply to vehicle donations. You can deduct contributions to a charity only if you itemize deductions on Schedule A of Form 1040.

Generally, the amount you may deduct for a vehicle contribution depends upon what the charity does with the vehicle. Charities typically sell donated vehicles. If the vehicle is sold by the charitable organization, the deduction claimed by the donor usually may not exceed the gross proceeds from the sale.

If your deduction is $250 or more you must obtain written acknowledgement of the donation from the charity. If your deduction is more than $500, this written acknowledgment or Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, must be attached to your return. Among other things, the acknowledgment generally must include the gross proceeds of the sale, the vehicle identification number, and a statement certifying the vehicle was sold in an arm's length transaction between unrelated parties.

If the organization intends to make significant intervening use of the vehicle or material improvements to the vehicle, the acknowledgment must include certain certifications. If the organization intends to sell the vehicle to a needy individual at a price significantly below fair market value, or gratuitously transfers the vehicle to a needy individual, the acknowledgment must also include certain certifications.

In addition, for deductions greater than $500, Form 8283, Noncash Charitable Contributions, must be attached to the return.

You can generally deduct the vehicle’s fair market value, if:

• The organization makes significant intervening use of or materially improves the vehicle
  
  
• The organization gives or sells the vehicle to a needy individual at a price significantly below fair market value in direct furtherance of its charitable purpose of relieving the poor and distressed or underprivileged who are in need of a means of transportation
  
  
• The claimed deduction is $500 or less

The fair market value cannot exceed the private party sales price listed in a used vehicle pricing guide.

For more information see Publication 526, Charitable Contributions, Publication 561, Determining the Value of Donated Property, and Publication 4303, A Donor’s Guide to Car Donations, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).