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If a lot of old cars disappear from your neighborhood before the end of the year, don't blame thieves. Blame Congress. After years of fretting that people were ripping off the IRS by claiming exorbitant tax deductions for clunkers that they gave to charities, lawmakers have cracked down with a vengeance.
Under the current law -- which covers donations through December 31 -- you can deduct the fair market value of the car. If it's more than $5,000, you must back up the deduction with an appraisal. If it's $5,000 or less, you get to set the car's value based on estimates from used-car dealers or Web sites, such as Edmunds.com or Kelley Blue Book.
Starting next year, your write-off will be limited to the price at which the charity sells your car. That may seem fair, but because charities go for quick turnarounds by selling vehicles at auction, you'll be stuck with a lower, wholesale price.
Charities aren't happy about the extra hassle involved with getting written sales reports to donors, or the likelihood that reduced tax benefits will put a crimp in the number of automobiles donated. But they are expecting a flood of used cars to roll in before the rules change.
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