The new IRS rules for vehicle donation went into effect January 1, 2005. The new rules have significantly changed the amount most donors can deduct for their car donation, according to Karen Campese, CEO of cars4charities, a national non-profit car donation center. The old law allowed the donor to deduct the fair market value of their donated car. They were allowed to use a pricing guide such as the Kelley Blue Book or the National Automobile Dealers Association Guide to determine the fair market value of the car., says Campese. Now, people who donate older, less valuable cars can deduct up to $500.

Those who donate more valuable cars can only deduct the amount the charity sells the car for. In most cases, the amount the charity sells the car for is less than the Blue book amount. In order to guarantee the donor the best tax deduction possible cars4charities now sets a minimum selling price on better vehicles. According to Campese, "This rule change has resulted in a big decrease in the number of more valuable cars being donated to charity and a big increase in number of less valuable cars being donated."