Tax break curbed: Changes to donation write-off may hurt charities

By Francis X. Donnelly
The Detroit News

BOO DAVIS / THE SEATTLE TIMES

E-mail this article Print this article Search archive Most read articles Most e-mailed articles

Related stories What to know before donating your vehicle

If you have an old car that you've considered donating to charity, better move quick: The popular tax break, reported on more than 700,000 tax returns a year, will lose most of its attraction at the end of the year.

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.

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.

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.

The expected loss of funding comes at a vulnerable time for charities, which already have been hurt by drops in contributions because of the shaky economy.

In the Puget Sound region, many charities are taking a wait-and-see approach, but "there is some real concern that this new law will have a chilling effect on people donating vehicles," said Diane Gallegos, associate director of Habitat for Humanity of Seattle/South King County.

Some years, she said, selling donated vehicles brings in around $50,000 for the organization — about the cost of building materials for one house. If there's a dip in donations, charities will likely begin seeking new funding sources.
 
Cindy Burgett, president of the Washington Council of the Blind, hopes future donors aren't scared off. Last year, the organization sold about 2,500 donated vehicles, which raised around $140,000, or nearly 64 percent of its total budget.

Burgett believes the type of people who donate cars aren't in it for the money and will continue to do so.

Worried about the imminent loss of money, some charities are stepping up their efforts to collect cars from residents before the law goes into effect. Charities are expecting a surge in donated cars during the last two months of the year. But after that, they worry about a scarcity of donations.

Some charities were upset that the loss of their funding was contained in the same $145 billion bill that gave tax breaks to large corporations.

The sweeping legislation provides $42.6 billion in relief to multinational companies and $76.5 billion in tax breaks for manufacturers.

Seattle Times reporter J.J. Jensen contributed to this report.