Before we move, we are planning to donate a ton of extra things like clothing, kitchen appliances, and books. Since this might be the first year ever that we can deduct charitable donations from our taxes (yay!), I wanted to check in what documentation I needed to obtain. Apparently, the government thinks too many people have been inflating the values of their old sweaters and other creative deductions:
– In 1986 Arkansas governor Bill Clinton deducted $2 for a pair of used underwear he gave to Goodwill.
– As president, Richard Nixon underpaid his taxes by $445,000, based largely on a huge deduction he took for donating his papers. In response the IRS limited the value of “self-created” documents to the cost of the ink and paper.
– Ordained ministers who tried to deduct their incomes as a charitable donation to themselves!
So, now we have to deal with these tighter requirements from the IRS:
You cannot claim a deduction for clothing or household items you donate after August 17, 2006, unless the clothing or household items are in good used condition or better. However, a taxpayer may claim a deduction of more than $500 for any single item, regardless of its condition, if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances, and linens.
To prove your items were in “good used condition or better” in the event of an audit, the best bet is to get receipts whenever possible and to take digital photographs of everything. Another good suggestion from this CBS Marketwatch article:
Take your donations in during the day on a weekday, when the organization is not so busy. Create your own little form that says “These clothing and household items are in good condition, in compliance with IRS rules.” And have the person receiving the items sign and date the form.
As you can still only deduct the “fair market value” of each item, I also found this valuation guide from the Salvation Army to be very handy. Finally, there are even more appraisal requirements if you donate any item valued at over $5,000 or “a group of similar items”. (Nothing in my entire house is worth five grand, so I’m not really concerned about that.)
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I’ve used TurboTax’s It’s Deductible for the past few years. It’s easy to use, has a comprehensive library of goods, and good help on determining my items’ condition.
It also helps that when we drop items off we keep a fairly detailed list and get a dated receipt from the Goodwill store.
-Wes
Turbotax also has an exellent tool that incorporates your (itemized) donations into your tax return. They have a three tier (low, med, high value) categorization. It was incredibly easy to use and gave a fair value for my stuff. I believe the values they use are those that the IRS has put out, but can’t confirm that.
You can put up to $500 in donations without having to prove a thing. For some reason $500+ is the magic number where you might want to get a signature from a good will rep.
When I moved, I freecycle-d all kinds of things. My crummy washer went to a couple who had just had a baby and one had lost their job. My children’s books (and bookshelves) went to a teacher who couldn’t buy them out of pocket.
No tax deduction, but I knew my stuff was going to people who really needed it.
i really enjoy this blog. this article was very helpful. i donate clothing to the salvation army every year and i am always at a loss of what to do come tax time.
Make sure you’re honest about it and don’t try to deduct over the $500 dollar limit and you’ll be ok.
Have a garage sale instead. That way, the most valuable stuff will sell and everything else you can just give away for free (either at the end of the garage sale, on craigslist, or at the salvation army). That way, the stuff you are giving away is of nominal value and you don’t have to worry about deducting from taxes, etc.
I just used craigslist in Los Angeles and got 2 free lamps and a loveseat…there was lots more free stuff on there as well.
A good software tool for this is ItsDeductible by Turbotax. It uses recent Ebay sales data to determine “fair market value” for each item. It works with Turbotax and automatically fills in IRS form 8283 for you.
You do have to make a judgment about each item’s condition: good, fair, poor, so taking photograph is probably a good idea too.
Thanks for the link to the Salvation Army list. I found it very helpful
I also give away a truckload of clothes every year — and somehow also have too many left over. Yes, my accountant usually takes between $400 and $500 for all that. Honestly, it’s worth at least that much. Sometimes I leave other stuff too — like the more expensive baby toys (exersaucers, playgyms) at a local school. My wish is that (without sounding too strange) that a poor family would come to my house and take everything they wanted — with the exception of a few of my clothes, and some my furniture. If someone could use the junk I have and really enjoy it — it would be wonderful to me. And my house would be so much cleaner!
“You can put up to $500 in donations without having to prove a thing. For some reason $500+ is the magic number where you might want to get a signature from a good will rep.”
What you were saying sounds like how it worked in the past, but I don’t think this is the common interpretation of the new IRS rules as of August 17, 2006.
In the event of an audit, the onus is on the individual to prove that (1) the items were in good condition and (2) the fair market value was given, no matter what the value. You can’t just drop off a box of stuff and call it $490 anymore. Above $500 is when you would need a professional appraisal.
I like the sound of donating your stuff for no gains. The hospital we had our daughter in we donated all her baby stuff to when she out grew it. I donated all my college books back to the college library last month. The bottom line is like AC says, you know its going to a good home and that’s enough for me.
I thought the only way to benefit from tax-deductible donations/gifts of household items and clothing is only if you “itemize”, by using the Schedule A;. If the standard deduction is still greater than your itemization, then you lose out the tax-deductible benefit(s) of donating.
Recently I ran across the site http://deductiontraq.net. Using this site, you can lookup the fair market value of millions of items. They use historic eBay data to find the price of items.
Also, you can upload pictures, track cash donations etc. The system generates Form 8283 with your data.
The above URL took me to a “The page cannot be found” response for Deduction Traq – I finally figured out that it should be http://www.deductiontraq.net , and the link for the Salvation Army Valuation Guide is http://www.satruck.com/ValueGuide.aspx
I have added both to my favorites as well as the link to the IRS publication on Charitable Donations http://www.irs.gov/publications/p526/ar02.html#d0e2279
In the past, I have used TurboTax ItsDeductible, and it’s a good program, but I’m going to try the Deduction Traq and / or the Salvation Army guide this year.
This last year I cleaned out my closet – having gained weight – and donated 163 items of clothing ( 91 tops, 33 pants, etc ) plus 19 pairs of footwear that were all in excellent condition and hardly worn. I intend to use the high fair market valuation for most all of them because they honestly were like new.
I also took extensive digital photos of everything, showing that some still even had the tags on them, and making sure that every item and it’s great condition could be clearly seen. I then typed out the detailed list of everything – i.e. 12 Polo Golf T-shirts short-sleeved, 17 Turtle Neck T-shirts long-sleeved, 6 Sweaters – Silk & cashmere & cotton – Long-sleeved, etc, and then I took the list with me to the charity and had the lady sign and date MY list, in addition to the donation receipt she gave me. It took some time, but I am ready in case I should ever be audited. For years, I have also saved every receipt from every purchase I ever make, just in case.
The correct Salvation Army website is:
http://www.satruck.com/usw/www_usw_arcdonate.nsf/vw-dynamic-index/B486A207256E3F8F88257447006E5C81?openDocument
The live link for the Salvation Army donation value guide: http://www.satruck.com/donation_value_guide/
if I get something for free and give it to good will can I steal rite it off and is there a limit on how much I can turn in in a year