When you give away household items like clothing, appliances and other goods to a qualified charity, your generosity can add up to a tax write-off if you itemize your deductions. The amount of your deduction is generally the donated property’s “fair market value” (i.e., the price similar property would sell for in the open market).
Unfortunately, one of the most difficult problems connected with noncash donations is determining their FMV. In fact, when you give away property of high value, the job of determining worth is best left in the hands of a professional appraiser. Or, when you donate property that has increased in value, special tax rules apply and you should consult with this office before you make your donation.
The guidelines offered below are provided as aids for setting value on the most common type of noncash donations (miscellaneous personal items) that have decreased in value since the time they were first acquired:
- Used Clothing: The IRS provides no set formula for valuing clothing items. However, keep in mind that the fair market value of used clothing and other personal items is usually much less than what you paid for them. A visit to a local thrift shop may help give you an idea of current selling prices for items like yours.
- Household Goods: The value of used household goods (e.g., furniture and appliances) is also much less than their original cost. If the property is worn, inoperable or out of style, it may have little or no market value. However, photographs, purchase receipts, and newspaper ads describing similar property should help support a valuation.
- Cars and Other Vehicles: Congress imposed some tough rules that substantially limit the deduction for this popular charitable donation.
RECORDKEEPING AND REPORTING OF NONCASH DONATIONS: Your recordkeeping of noncash donations depends on the dollar amount of your gift. That value also determines the manner in which donations get reported on your tax return.
- Gifts valued at less than $250: You will need a receipt from the charity showing the date of your contribution, the organization’s address, and a reasonably detailed description of the property. The receipt doesn’t have to state the value of the property you gave away. Keep in mind that you aren’t required to have a receipt when it’s impractical to get one, for example, if you deposit your donation at an unattended bin site. But whether or not a receipt is required, you still need to keep a written record of each item you give away.
- Gifts of $250 but not over $500: For goods valued in this category, you must obtain a timely written acknowledgment of your gift from the charity. Without the written acknowledgment, you get no charitable deduction. The acknowledgment needs to contain the following information: (a) a description of the property you gave away, and (b) whether you received any goods or services from the charity in return for your gift (if so, the value of the goods or services needs to be stated).
- Gifts over $500 but not over $5,000: For donations of this amount, you must have a receipt from the charitable organization in the same format described under “Gifts of $250 but not over $500”; otherwise, you’ll get no deduction. However, the information required to be included in the written record must also include details about your acquisition of the property donated. In addition, deductions for these larger gifts require attaching a special IRS form to your tax return for the year of your contribution.
- Gifts over $5,000: You are required to obtain a qualified appraisal and attach an “appraisal summary” to your tax return. The values of all items donated during the year that are similar in nature are added together to determine whether this rule applies. Since many complicated rules can apply to contributions in this category, it’s best to contact this office before you make your contribution. Recordkeeping for gifts valued over $5,000 are the same as those listed previously for “Gifts over $500 but not more than $5,000.” In addition, you are required to get an authorized signature from an official of the charitable organization. Page 2 of IRS Form 8283accommodates the required information and provides the required signature areas to meet the above requirements. Use Section B; Part I to describe the gift, Part III for the appraiser and part IV for the Donee acknowledgement.
Noncash Contribution Record: A useful Noncash Charitable Recordkeeping Form can be downloaded for your personal use. Use the form to record property given, condition, cost, your estimate of fair market value, etc.
CAUTION: This is a brief summary of the regulations for valuing and keeping records for property donations. For additional specific details, please consult with our office.
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