Donated cars get a rough ride by U.S. Congress

Community Action, Oct 25, 2004

WASHINGTON -- The door has restricted opportunities for U.S. charities that rely on donations of cars from owners seeking tax write-offs. A little-noticed provision in a corporate tax bill approved in the Congress would sharply limit donors' tax write-offs for car donations and other material gifts.

Several hundred thousand--people each year give used cars to charities. They can claim a tax deduction for the fair-market value of the car, which most charities will accept in any condition. As long as the value of the deduction is less than $5,000 the income tax officials will accept the claim.

Some donors vastly overestimate the value of the cars on tax returns. Now the car donor can write off only the amount the charity gets when it sells the car.

A 2003 study by the Government found that charities received as little as 5 percent of the declared value of the donated cars, while tax bills were reduced by $654 million. Donated cars are usually sold through an auction house that sells them below retail price.

Over 250 organizations, including the American Cancer Society, and Goodwill International joined in opposition to the bill. President Bush indicated that he will sign the bill.