Released: December 19, 2006

Give old cars to needy, not auctions

Source: Sandra Block, USA Today

For years, giving a car to charity offered multiple benefits. You could get rid of your beater, help a worthy cause and pocket a sizable tax deduction. There are still many charities that will happily haul away your 1987 Chrysler LeBaron, but a law that took effect last year has deflated the tax deduction. Now, most donors can deduct only the amount the charity receives when it sells the vehicle — which is usually much less than the amount claimed under the old rules.

Congress tightened the rule to prevent taxpayers from exaggerating the value of donated cars. The IRS expects you to base the fair market value on the price you would get if you sold your car. Depending on your car’s condition, its fair market value may be considerably lower than the amount listed in used car pricing guides, such as the Kelley Blue Book.

A report by the Government Accountability Office found that many donated cars were sold at auction for a few hundred dollars — far less than the deductions that donors were claiming on their tax returns.

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