Recent changes to tax laws have made Uncle Sam a far more frugal used-car shopper.
Donating a car used to be a win-win situation. You were able to avoid the hassle of a private sale, receive a nice tax deduction from the government, and get that warm feeling from doing a good deed all at once.
But the government grew tired of paying often inflated prices for used vehicles, and in 2005 the law changed so that any car, boat or plane donation above $500 would be deducted for its actual selling price, not its supposed market value. In other words, if you donate a car with a value of $8,000 to a charity, and that charity sells it for $750, you get the latter. There are exceptions, including one for cars that end up being driven by charities, but exploiting them requires careful paperwork.
Craigslist suddenly sounding much more attractive? You’re not alone. The well of charitable vehicle owners has dried up – used-car donations for 2005 dropped 67 percent.
Source: Wall Street Journal