ALEXANDRIA, VA - Charities that raise money through vehicle-donation programs are seeing a small but steady increase in donations ahead of a Jan. 1 change in tax laws

that will limit the deductions taxpayers can take for such gifts, reported the New York Times.

Many charities that rely on such programs say they will retool their programs after the New Year to help donors obtain the maximum value for their gift, and are hopeful that the donations will continue.

Under current law, a taxpayer who donates a vehicle is allowed to deduct the fair market value of the car or truck on his or her tax return.

That has made vehicle donations particularly attractive options, because the fair market value is usually much higher than the value one would get at trade in.

In tax year 2000, about 733,000 taxpayers filed for car-donation deductions, collectively reducing their tax liability by an estimated $654 million, or $892 each, according to a November 2003 audit by the General Accounting Office that provided the impetus for the tax-law changes.

Under the changes to take effect in 2005, a taxpayer can deduct only the amount that a charity receives when it sells the vehicle. (Taxpayers may still deduct the fair market value of a vehicle worth $500 or less.)

Jim Hartman, director of the vehicle-donation program for the Alexandria-based Volunteers of America, estimated that donations are running 8 percent to 9 percent ahead of last year.

At Volunteers of America, which nets $10 million of its $800 million annual budget through vehicle donations, Hartman said some surveys indicate they might see a reduction of up to 50 percent.