There are still plenty of good reasons for donating a vehicle to charity - but getting a generous tax deduction may no longer be one of them.

The IRS has changed the rules governing how much value a person can claim for a vehicle donated to charity against their federal tax liability - eliminating a long-standing "loophole" used by some people to dump their old wrecks for more money than they were actually worth on the open market.

In the past, one could deduct the average retail value of the make/model/year vehicle being donated as listed in used car value guides like the Kelley Blue Book or the National Automobile Dealer Association's used car pricing guides. But the actual value of the donated car was often much less than the "average" retail value claimed.

Under the new rules, the deduction is limited to whatever amount the vehicle actually brings in when it's sold off at auction, less towing costs and so on. The charity will provide the donor - as well as the IRS - with a receipt. No more taking "book value" for your clapped-out 230,000 mile hooptie with the rusted out floorpans, missing doors and locked-up engine. Instead of the $2,300 a decent condition example of your make/model vehicle might fetch, you'll only get to claim the $100 in scrap value it actually pulls in.

Uncle Sam was apparently tired of being scammed.

As an article in USA Today explained, one charity - Volunteers of America - received about 80,000 donated cars and trucks per year and netted about $10 million from the sale of these vehicles at auction. The clever USA Today reporter ran the numbers through his calculator and came up with a figure of $125 per car donated.

The figure suggests that the majority of vehicles unload on Volunteers of America were heaps - and that the disparity between their actual value and what the people who unloaded them were claiming on their 1040s was huge. Even if each donor took a deduction of just $800 - not much in today's used car market - that's still a few hundred percent more than what the typical donated car proved to be worth.

One problem, though, is that this little dodge actually did help charities.

The $10 million Volunteers of America generated through the sale of old junkers is not chump change. Many charitable groups - including the Salvation Army, Kidney Foundation and so on - depend heavily on the revenue produced by their vehicle donation programs. If people stop giving away cars as a result of the "loophole" being closed, there will be less money available to do work that everyone agrees is worthwhile

Instead, the money will go into the maw of Uncle Sam.

The IRS hopes it will recoup $2.4 billion over a ten year period as a result of the change in the law. That might very well mean $2.4 billion less for charities such as Volunteers of America. Perhaps more. Take away the economic incentive for people to donate their vehicles to a charity and many will decide it makes more sense to try and haggle for top dollar at trade-in time - or just keep the beater in the backyard as redneck lawn sculpture. Not many people are into giving stuff away - unless there's something in it for them.

Closing the vehicle donation loophole may have been pennywise (at least from the government's point of view) but pound foolish from the standpoint of serving a good cause.

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