Elanso

I’m sure that you’ve seen a number of signs and ads that encourage you to donate your vehicle to charity. In our area, they’re plastered all over the place… Do they actually work?

Not so much anymore. In 2004, Congress changed the rules regarding car donations for charity. The rules more or less limited the deduction that you could claim to $500 or the lesser of the car’s fair market value (good) or the actual proceeds from the sale of the car (not so good). The latter has seriously impacted both the number and value of used car donations.

How much of an impact did charities see? The accounting firm of Grant Thornton reports that between tax year 2004 and 2005, the number of car donations valued at more than $500 dropped by approximately 67%. The total value of donations fell more than 80%.

What happened?

The changes in the rules may have made it more appealing for some folks to sell rather than wait to find out the charitable donation value. With the lack of a large deduction as a “sure thing” - the numbers of donations dropped. And the requirement to substantiate the donation by using the value of the sale clearly forced folks to, um, maybe not *fudge* on their returns (not that I’m saying it happened). So a number of lovely cars (perhaps like the one pictured above) that were being donated to charity for “fair market value” were revalued - producing a very different result than before.

But there was good news: despite the reduction in charitable car donations, Americans actually increased the value of overall charitable donations in that same time by a factor of 10%. The study did not specify whether that increase was largely cash or goods. I’m guessing it was heavily stocks and appreciated assets - but that’s just me.

But it does make me wonder… If you donated to charity last year, was it mostly goods, mostly cash or a combination of the two?

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