Used Car Donations Take a Hit
Wall Street Journal

....If you donate a car or some other vehicle worth more than $500 and the charity or a middleman sells it, you typically can deduct only the selling price, even if it's far below what you think the vehicle is actually worth. Previously, donors typically could deduct the full fair-market value.

But the law also includes a few important exceptions for donors who understand the fine print and are willing to take the time to do some homework.....


About 297,000 federal income-tax returns reported used-car donations for 2005 -- down 67% from 901,000 for 2004. The amount claimed for these donations plunged by 81% to $470 million from more than $2.4 billion in 2004, according to IRS economist Janette Wilson in an article in the Statistics of Income Bulletin, a quarterly publication. Donations of other vehicles also fell sharply, Ms. Wilson reported.

To be sure, the article cautioned that the overall effects of the law change "may be overstated by these comparisons" because vehicle donations aren't reported separately on Schedule A by taxpayers whose total deductions for noncash contributions don't exceed $500. Thus, "the number of such additional donations is not known," the IRS said....

Additionally, the 2004 numbers were up significantly from 2003, likely reflecting a one-time surge in donations by taxpayers taking advantage of the old law before it changed. For 2004, the total amount claimed for donations of autos and other vehicles rose by nearly 12% from 2003, driven by a 13% increase in the number of contributions, the IRS said in a separate report.

The vehicle-donation figures for 2005 are the latest available IRS data. But a separate study released early this year by the U.S. Government Accountability Office, a congressional investigative agency, said some charities reported a "substantial decline" in the number of vehicles donated from 2003 to 2006....

....there are some important exceptions. For example, you generally can deduct the vehicle's fair-market value, rather than the sale-price amount, if you claim a deduction for it of $500 or less, the IRS says.

Other exceptions hinge on what the charity plans to do with your donation. For example, the IRS says you typically may deduct the vehicle's market value if the organization gives it away, or sells it, to a "needy individual" at a price "significantly below" fair-market value "in direct furtherance" of its charitable purpose of "relieving the poor and distressed or the underprivileged who are in need of a means of transportation."