Roy Lewis from Fool.com gave out a great summary of how to properly donate a car and claim tax benefits. The bottom-line, IRS is growingly aware of tax avoidance practices by inflating the value of donated cars and one needs more proof to support the deduction claim.
Roy's advice of the paperworks to support your claim:
- Attach a reasonably detailed description of the vehicle.
- Take pictures of the car, inside and out -- even the engine. Remember that a picture is worth a thousand words. Attach the photos to your return.
- Attach pages from your local Auto Trader or similar publication that advertises used cars for sale. Find vehicles that are similar to yours in looks and condition and factor those advertised sales prices into your FMV analysis.
- Get the blue-book information and attach it. While it's not the only source to prove valuation, it's one that will help with other sources.
- How about a testimonial from your local mechanic or auto dealer? A simple statement claiming that the vehicle is in running condition with no known or apparent malfunctions would be a good thing to attach to the return. Heck, even if there are some problems with the vehicle, see if the mechanic will state the amount of money to fix the problem. You can then factor that into the correct FMV of the vehicle.