Determining Value and Figuring Tax Deductions From Your Charitable Donations
Posted by: Brookside Admin
If you are relying on a sizable tax break from charitable donations you've made throughout the year, you'll want to read this. Donating your old clothes, or goods like furniture or kitchen items, to qualifying charities does allow you to write the value of those items off of your taxes. But, don't expect to make a giant dent in the amount of taxes you owe. Before claiming a value for the items you've donated this year, you'll need to understand the IRS's definition of Fair Market Value.
Unfortunately, you don't get to write off the original value of an item when you donate it. Instead, you're asked to use its Fair Market Value. The FMV, as defined by the IRS, is "the price that property would sell for on the open market." Typically, for used clothing, that means garage sale pricing. So, while you may have paid upwards of $100 for a winter coat, it's not likely to be worth more than $60 to the IRS.
Additionally, all of your donated items need to be in good shape or better in order to qualify for value on your taxes. While some charities may accept donations of items that are of worse quality, you can't assign any value to them and claim them on your taxes.
As mentioned previously, the charity you're donating to is also important. Use the Exempt Organizations Select Check provided by the IRS to find out if your chosen charity qualifies you for tax deductions.
When it comes to donating clothing, there are no high dollar items. Many charities have posted helpful tables that list price ranges for commonly donated items. According to these, the most you can expect to claim is $60 for evening attire, or men's coats that are in excellent condition. These same items could be worth as little as $7 for certain conditions. Children's clothing is often donated, but the average value for each individual item hovers around $5 or less. For good quality men's and women's clothing that's also in excellent condition, you can safely place an average value of about $10 on each item. While that does add up when donating large amounts of clothing, but you can see how it would be difficult to receive a sizable write off from clothing donations alone.
Household goods donated to charity can offer a little more value. These goods could be something as small as kitchen utensils, dishes, or pots and pans, which all have a FMV of about $1. Or, they can be as large as a dinette set, or bedroom set, which can be worth as much as $1000. More good news is that just about anything in your home can be donated. Lawnmowers, TVs, bikes, vacuums, golf clubs, blankets, gas stoves, or refrigerators all qualify you for a deduction.
It's also important to get a receipt from your charity whenever donating goods. Often, these will be left blank and left to you to fill in the specific items donated and the amount for each. But, for high dollar items, it's critical to have some documentation of your donation.
There are a number of contributing factors that determine the amount you can deduct for charitable donations. For non-cash donations like we've discussed here, the general rule of thumb is that they can't exceed 30 percent of your adjusted gross income.
The final point to remember is that you must itemize in order to claim this benefit from charitable donations.
If you have questions about deductions on your taxes, or just need some general tax help, contact us at Brown Kinion & Company CPAs today!