As the popularity of car donations increased in the early
2000s, the IRS became concerned that taxpayers were often overvaluing such
donations and charities were receiving very little revenue. According to a 2003
report by the Government Accountability Office, a 1983 donated truck sold for
$375, provided the donor a $2,400 tax deduction and funneled just $31 to the
charity that the transaction was intended to benefit! The IRS tried to crack down on these abuses
in 2005 via a new federal law that made it more difficult for donors to inflate
the value of their cars in order to get bigger tax breaks. As a result, car
donations declined 78% from $2.6 billion in 2004 to $573 million in 2008.
Concerned by this drop in charitable income, the Chronicle
of Philanthropy reports that some lawmakers want to ease up on the
law. Whether or not that happens remains
to be seen. So taxpayers that are claiming a deduction for making a car
donation should continue to be very careful in how they value their deductions.
We offer tips on our site to help you make an accurate claim.
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As a 501 (c) (3) organization itself, Charity Navigator depends on public support to help donors make informed choices. Please consider investing in the future of Charity Navigator by making a donation today. Donate now >>