New Law to Limit Write-Off for Donated Cars

When people donate their old cars to those who don't have a way to get to work, it can be a big benefit for both sides. For years, nonprofit organizations like Goodwill have been providing those old donated vehicles to those less fortunate, and people donating get a tax write-off.

But come next January, a new law may affect those donations. The federal government will limit the amount of tax deductions for cars donated to these nonprofit organizations, because they're tired of people abusing the system.

"We expect and anticipate 50 percent of our donors actually donate with a tax deduction in mind," said Ted Mauldin with Savannah's Goodwill Industries.

For those looking to write off a cars whose bluebook value is more than $500, it's a great way to get a tax break, even if the car isn't worth the wheels it rides on.

"This year, it's different," said Mauldin. "You bring a car in, you look at the bluebook value and you can deduct the full bluebook value for that vehicle."

Sounds good, but the federal government says that's an abuse of the system. So it's changing the rules to make sure you don't write off your old clunker for more than it's worth.

"Next year you have to wait until the car is sold," explained Mauldin. "The organization, such as Goodwill or some other charitable organization in tern, has to send a letter out to you, the donor, stating what the sale price was for that vehicle. Then that sale price is what you can deduct."

Because of this new law, Goodwill predicts it will cut more than $200,000 from its programs.

"That money in tern, especially for Goodwill industries, becomes revenue we use to generate job training programs for people in the community," said Mauldin.

With fewer cars expected to roll in, nonprofits like Goodwill will have to find another way to make up for what once meant big revenue.

You can still donate your old car for the full market value, but you have to do it by the end of the year. The new law takes effect January 1 2005.

Reported by: Nicole Teigen,