Donating Non-Cash
Items to Charity
Are You Getting the Full Tax Benefit on the Gifts You Make?
You have done your spring cleaning and now you have boxes of household
items and outgrown clothing. Should you toss them, have a garage sale, or
hold on to them for a while longer?
If you opt for a garage sale, you have to devote time to making everything
presentable, marking prices, setting up tables, advertising, and attending
to the sale. The benefit is instant money for all your hard work, but
generally at far less than what the work and items are really worth.
A
better option might be to donate that property to a qualified charity such
as Goodwill, the Salvation Army, or your local church. If you are able to
itemize, you can deduct the fair market value (FMV) of the property you
donate to charity. Some of the most common mistakes that people make when
donating property are:
-
Failure to document
what was actually donated to the charity. Say you donated six men's
shirts, two pairs of children's shorts, three blouses, and five pairs of
men's pants, chances are you just put everything in a bag and told your
preparer that you donated a bag full of clothing, but you have no
documentation. Keep a good list of the items you donate.
-
Under-valuing the
property that was given to the charity. This is always a subjective area
but the law states the deduction is equal to the FMV of the property
given. What do you use as the FMV? If you give used clothing to
Goodwill, for example, the FMV would be the price that typical buyers
actually pay Goodwill for clothing of this age, condition, style, and
use. Along with a detailed list of the items you donate, establish a
value for each item. Local thrift stores often have a list of items with
suggested values.
Check the Salvation Army's online donation value guide.
-
Failure to obtain
documentation that the charitable organization received the property.
Charitable organizations will provide you with a receipt acknowledging
your contribution. Sometimes you need to ask.
If you collect and
save these three types of documents, you are in complete compliance with
the law and are allowed to deduct the value of all property you donate to
a charity.
NOTE: There are more complex rules for
deducting charitable donations of major personal property items such as
automobiles, boats or aircraft! Check the
IRS Notice for more details.
