Car-donation tax break to end Jan. 1
By Francis X. Donnelly
Detroit News
A popular tax break reported on more than 700,000 tax returns a year — donating an old car to charity — will lose most of its attraction at the end of the year.
Effective Jan. 1, people who donate their cars to charities no longer will be able to determine the car's market value to be deducted from their taxes. Rather, they can deduct only the amount for which the car was resold. Here's how it will work: • Now: A person donating a 1993 Ford Taurus GL that's in good condition and has 110,000 miles on it could deduct $1,335, which is the value listed in the Kelley Blue Book. • After Jan. 1: The tax break for the same Ford Taurus probably would be limited to $300, which is the price some similar cars have fetched on resale by charities.
As much as taxpayers will miss the write-off, charities will be hurt even more.
Deduction change on Jan. 1
With a survey showing that most people won't continue donating their clunkers, some charities expect to cut their budgets by as much as 60 percent, drastically reducing services such as homeless shelters, soup kitchens, low-income housing and drug treatment centers.
"The government sends us the tired, poor and weak and then takes away the funding we try to scrape together to help those people," said John George, executive director of Motor City Blight Busters in Detroit. "This is another bad event brought to you by our fine government. I wish they would keep their hands off the few measly dollars we use to help people."
The expected loss of money comes at a vulnerable time for charities, which already have been hurt by drops in contributions because of the uncertain economy.
Effective Jan. 1, people donating cars or other items to charities will no longer be able to deduct the market value of the objects from their taxes, according to legislation passed by Congress last month.
Instead, they can only write off the amount that the items fetched when they resold, a figure that is usually considerably less than the market value.
People who have donated their cars to charities said the tax change would make them less likely to do so again. Instead, they said they would try to sell the automobiles themselves.
"If I can sell it and put money into my pocket, I have to look at the bottom line," said Jim Averill, 45, of Lake Orion, Mich., who is trying to sell a Mazda MR6 that he would have donated if not for the change in the law. "The issue is financial. Everybody is looking at that."
Charities are expecting a surge in donated cars during the last two months of the year. After that, however, they're worried about what they're sure will be a scarcity of donations.
