How to value a donated car?

A donated car's value for tax purposes is its fair market value (FMV) on the date of donation, but your actual deduction is often capped at whatever the charity sells it for. This distinction trips up a lot of donors, so it's worth understanding both halves of the equation before you file.

Fair market value is the price a willing buyer would pay a willing seller, with neither side under pressure and both aware of the vehicle's condition. It's not the trade-in number or the "clean retail" figure from an online guide; it reflects the actual mileage, mechanical condition, body damage, interior wear, and any options or modifications on your specific vehicle. If you use a pricing guide as a starting point, the IRS expects a private-party value adjusted to match your car's real condition, not a best-case estimate.

Two rules determine what you can actually claim:

• If the charity sells the vehicle as-is without material improvement, your deduction is generally limited to the gross proceeds from that sale, even if your FMV estimate was higher.
• If the car sells for $500 or less, you may deduct the lesser of FMV or $500.
• If the claimed value exceeds $5,000, the IRS requires a qualified written appraisal completed by an independent appraiser, filed with IRS Form 8283.

For classic, collector, or higher-value vehicles where FMV is harder to pin down from a standard pricing guide, a car donation appraisal grounded in comparable sales and market data gives you a defensible number the charity and IRS can rely on. Even under the $5,000 threshold, a written appraisal strengthens your deduction if the vehicle's value is uncertain or unusual.