While fewer people are donating their used cars because of relatively new tax rules governing deductibility claims, some taxpayers still favor this type of charitable contribution. The benefit is mutual: Donors receive tax deductions, while charities receive automobiles to sell or use for their organization. Approximately 733,000 taxpayers, or six percent, claimed deductions for vehicle donations on their 2000 federal tax returns, according to the latest statistics available from the Internal Revenue Service (IRS).

With tax season upon us, you may be thinking about donating that old clunker of yours for tax relief from Uncle Sam. Before you do, however, experts warn that you should do a little research to ensure that you will receive that coveted deduction and avoid some potential pitfalls in this process.

According to the IRS’s “A Donor’s Guide to Car Donations,” or Publication 4303, the first step is to verify whether the organization is tax exempt under section 501 (c) (3) of the Internal Revenue Code, meaning that it is eligible to receive tax-deductible contributions. If the organization doesn’t fall within this category, you won’t be able to deduct your vehicle donation off your taxes.

You can research the organization’s public charity status on the IRS website at www.irs.gov, which lists tax-exempt charities on its Cumulative List of Organizations, or Publication 78. You may also verify the organization’s status by calling the IRS Customer Account Services at 877/829-5500 with the charity’s name, and, if possible, address.

If the charity or nonprofit group you’re considering donating your vehicle to is not listed with the IRS, “you definitely want to investigate the group,” says Suzanne E. Coffman, a spokeswoman for GuideStar, which makes nonprofit information available at www.guidestar.org. Coffman suggested that consumers call the organization directly and request a copy of its letter of determination, a statement from the IRS documenting a group’s tax-exempt status. Churches and other faith-based organizations aren’t required to register with the IRS but may have a letter of determination or other proof of their tax-exempt status.

The point is to trust your instincts. “If you’re getting funny vibes from the group or organization, don’t make the donation,” says Coffman. “With more than 1 million nonprofits in the country, there are plenty of other charities to choose from.”

Second, the amount you deduct for your donated car depends on what the charity does with it. If the charity decides to repair the car or use it, then you may deduct its fair market value from your taxes. (See IRS Publication 526, Charitable Contributions, and Publication 561, Determining the Value of Donated Property, for more information.) Also, you may claim the car’s fair market value if the charity sells your car for a lower price than it is worth to a low-income person.

“What this all means is that you really have to be in close communication with the charity to determine what it’s going to do with your donated vehicle,” says Sandra Miniutti, vice president of marketing for Charity Navigator, a nonprofit group that rates charities on its Web site at www.charitynavigator.org.

However, most charities sell donated cars at auction. In that case, you may deduct the amount the car sells for at auction from your taxes once the charity sends you the receipt from the sale. If your car sells for $250 or more, you also must obtain a written acknowledgement of the donation from the charity (see the “Donor’s Guide” for complete information).

If your car is worth more than $500, you must complete Section A of IRS Form 8283 and attach it to your yearly taxes. It must include the gross proceeds of the sale, the vehicle identification number and a statement certifying the car’s sale.

If the car sells for more than $5,000, you must complete Section B of Form 8283, with a signature from an authorized official of the charity. You also may need a written professional appraisal. And if the car sells for less than $250, you may deduct its fair market value.

Be warned: Due to the large number of vehicle donations, the IRS carefully audits deduction claims for cars. Miniutti explained that the passage of the American Jobs Creation Act of 2004 enabled the IRS to revise its vehicle donation rules. The IRS sought these changes after it found that donors were inflating the value of their cars.

However, now that the new rules have been in effect for a few years, charities have seen automobile donations drop off. “It’s not as popular among taxpayers,” says Miniutti. “I think it has dropped off partly because most car owners aren’t clear as to what the new IRS regulations mean.”

Charity Navigator and GuideStar also offer additional advice in donating automobiles to charities on their respective Web sites.

Finally, to deduct charitable contributions, the IRS requires that you itemize deductions on your Schedule A of Form 1040.

For more information, or to obtain a copy of “A Donor’s Guide to Car Donations,” Publication 4303, visit the IRS online at www.irs.gov or contact the IRS at 800/829-3676.