$500 threshold for receipts.
Know that there is a $500 threshold for receipt on your used car donation .If your car is worth more than $500, the deduction gets complicated. In such cases IRS would like to see evidence of how much the charity you donated to actually got for it. 
You need to get a receipt from the charity and you can only claim that amount irrespective how much you feel your car fair market value is worth. Refer to Donor’s guide To Car Donations Publication 4303 (Rev. 03-2008) Suggest you work with a qualified tax account. For example, you decided on your used car donation and donated your old Toyota that is worth $2,000. If the charity sells your donated car for $1000, your deduction is limited to the sales price of 1,000. Also the charity must give you proof of receipt amount within 30 days of you turning your car to the charity. By now, you should have gotten word from the charity as to what it did with your old vehicle. If you haven’t heard from the charity, follow-up with for the receipts. Plus, you now must include a copy of the acknowledgment with your tax return..
IRS rule on Intervening use exception
IRS provides an exception called Intervening use exception, which might allow you to claim the full fair market value of the car you are donating. For example you donated your $2,000 Toyota Camry to 
the charity Kidney cars Let us assume that kidney cars used the car for 3 months to help needy families. And after 3 months Kidney cars sold your Toyota for $1400. In this case, you could still claim the full fair market value of 2,000 with a letter from Kidney Cars detailing not only the sale price but also how your Toyota car was used for nonprofit works prior to the sale. Per IRS regulations, this is called ‘significant intervening use’ of the car that allows the taxpayer to claim the higher deduction. Refer to IRS Publication 4302 (Rev. 02-2009)
IRS Rule on Material improvement exception
Another exception that IRS states is the Material exception. You can Claim the fair value of your car if the charity intends to make a material improvement to the vehicle, a detailed description of the intended material improvement and a certification that the vehicle will not be sold before completion of the improvement is required for claiming the deduction. Note that what IRS means by Material improvements’ are functional (Engine or transmission etc) and excludes cosmetic work like painting, upholstery or accessories
Charitable gifts require itemization
To claim deduction for your used car donation, you must itemize instead of the standard deduction. This means you should keep receipts of what you donate and file form 1040 along with Schedule A. You may not be able to claim deduction on your used car donation if it is the only one deduction on your Schedule A form. 
To determine if you want to itemize or claim the standard deduction, find out how much of a standard deduction you can take. It depends on your filing status; For the Tax year 2009 returns, the deduction amounts are $5,700 for single or married taxpayers filing separately; $8,350 for heads of households and $11,400 for married couples who file joint returns.
Used car donation does not reduce tax, but Taxable income.
So If your itemized deduction and standard deductions are close, adding the used car donation may tip the scale by increasing the itemized deduction and could help you in your tax returns. Also note that that as a deduction, does not directly reduce your tax amount that you owe. It is merely reduces the taxable income, which mean you’ll pay less taxes. Also the deduction’s actual worth depends on your tax bracket. That means if you have donated your car for 2000$ and if you are in 25% tax bracket, this means a tax reduction of 500$. So if you want cash instead of a small tax break, sell your old car. If you’re bighearted and love social cause or alternatively don’t want to spend to get the car in good shape to sell faster, Used Car donation is the best idea
