CAR DONATIONS PLUMMETAutomobile donations have sharply declined since 2004, when Congress tightened the tax rules for claiming charitable deductions, according to an analysis of IRS data by Grant Thornton. Before 2005, taxpayers who donated a vehicle were allowed to deduct its fair market value. Tax legislation enacted in 2004 changed the rules to generally limit vehicle donation deductions of over $500 to either the actual proceeds from a vehicle’s sale or the vehicle’s fair market value, whichever is less.

The analysis by Grant Thornton’s National Tax Office shows that between tax year 2004 and 2005, car donations of over $500 dropped by two thirds. Over 900,000 tax returns claimed deductions for donated automobiles in 2004. In 2005, the last year for which the IRS has detailed data, less than 300,000 tax returns included such claims. The total deducted for all car donations declined from $2.4 billion in 2004 to just a half a billion dollars in 2005, a decrease of over 80 percent. The deduction claimed per car declined by 41 percent.

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