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Vehicle Donors Hit the Gas Pedal Tax Change Jan. 1 Boosts Generosity

From the Washington Post
Wednesday, December 15, 2004; Page B03
By Jacqueline L. Salmon

An impending law that will squeeze some of the tax benefits out of donating a vehicle to charity next year apparently is behind a holiday increase in car donations. Officials of nonprofit groups in the Washington area and elsewhere say they are seeing more car donations than usual as owners scramble to beat the legal change, which takes effect Jan. 1.

Vehicle Donation Processing Center, a California group that handles such gifts for 300 charities nationwide, said donations are about 15 percent ahead of last year. Goodwill of Greater Washington has taken in 135 cars in the fourth quarter, already 10 percent more than in the last three months of 2003, it said.

Later in the article, she explains:

The increase coincides with the passage of a corporate tax bill in October that will rein in tax write-offs for donated cars, boats, artwork and other big-ticket items in 2005.

Currently, people who give vehicles and other items to charity can deduct the fair market value when they calculate their taxes. But after complaints that the system was being abused by charities that auctioned the cars for far less than what was claimed by car donors, Congress cracked down.

Starting next year, the Internal Revenue Service will allow donors to deduct only the amount the charity receives for the sale of the vehicle if the price is more than $500. Donors still will be able to claim fair market value for clunkers valued at less than $500.

Some charities are using the looming change to prod donors into handing over their vehicles soon.

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