In its pursuit to curb inflated tax deductions, the IRS revised the Charity Car Donation Tax Law. The revision eliminates loopholes and deficiencies that donors have learned to abuse to trade off better value for their old cars. The logic behind this is quite simple: taxpayers would benefit more in giving away their beat up cars in exchange for substantial tax cuts.

Since its execution, donors/taxpayers are limited to the price their donated vehicle fetches based on its actual value. In the event that the charitable institution uses or materially improves the vehicle, the donors/taxpayers may then deduct the total cost of the vehicle’s market value, which may, again, be reflected on their tax deductions.

Since the revised Car Donation Tax Law has come into effect, a slump in the number of donated cars has been observed. Charitable institutions have seen the dramatic decrease in the number of cars being given to charity and attribute this to the fact that taxpayers can now take advantage of tax exemptions based on the supposed resale value of their cars. They usually get much less than the expected price.

The Senate Finance Committee feels that improper handling of tax deductions from car donations is unfair to other taxpayers who end up subsidizing the unjust deductions.

Despite numerous criticisms from charities and previous donors, the committee remains undeterred. Donors feel that the new law is not as appealing as it once was, when tax benefits were preferred over the resale price that old vehicles may fetch.

Charities are still hoping that the slump is temporary. They look forward to bringing back the time when a lot of donors traded in their cars and that was before the new law was made effective.