When it comes to donating to charity, you don’t have to limit yourself to giving money. Indeed, many charitable organizations can use donations of goods. Going through what you have at home can result in a generous and needed donation – as well as provide you with the opportunity for a tax deduction.
Realize that contributions to qualified charities are only deductible if you itemize deductions on Schedule A of Form 1040. As a general rule, fill out section A of form 8283 if your deduction for noncash property that is less than $5,000. If it is more than $5,000, you will need a qualified appraisal and you must fill in form 8283, Section B. If what you donate is more than $500k, then you will need to actually attach the appraisal. When in doubt, see IRS Publication 526 for more information or contact a qualified tax profesisonal as there are special rules for certain types of donated property (like clothing and household items must be at least in a good used condition).
Deducting Charitable Goods
Many taxpayers are surprised to find that they can deduct the goods that they donate to eligible charities. If you want to donate goods, though, there are some things to keep in mind to ensure that you can take the tax deduction:
- Items Should Be In Good Condition: Any items that you donate to charity should be in good condition if you want a deduction. This means that you can’t bring in items that are in poor repair and expect to receive a deduction. Make sure that any donations are in good, usable condition.
- Estimate the market value: Your deduction amount is not based on what you originally paid for the item. Instead, it is based on the current market value. One guide you can use is what you could reasonably expect to get for the item at a garage sale. There are also a variety of spreadsheets online that can help you determine the market value of the items you plan to donate. If any item is worth more than $5,000 you will need a qualified appraisal. If you pay for an appraisal, that amount may be deducted as a miscellaneous tax deduction subject to the 2% limit and not as a contribution.
- Get a Receipt: Just as you need a receipt for monetary donations to eligible charities, you also need a receipt for donated goods. In many cases, it is a good idea to figure out the market value of the goods before going to the organization. Many organizations simply ask you for the value, and use that when making a receipt.
- Keep Good Records for Taxes: You will need to keep your receipt for tax purposes. However, you can bolster your credentials with an itemized list. Make a list of the items you are donating, and the market value of those items.
Once you have donated your items, and you have your receipt, you are prepared to include the information on your taxes. As with cash charitable donations, your donations of goods are reported on Schedule A. Again, you need to itemize your taxes if you want to take a deduction for your donation of goods.
Benefits of Donating Charitable Goods
When you donate charitable goods, you provide a way for various organizations to fulfill their missions. Salvation Army and Goodwill stores can sell the items you donate to raise funds for their causes. Some charities use donations to give to the populations they serve. When donate usable items in good repair, you are helping others.
It’s important to understand, though, that this tax deduction isn’t a dollar for dollar reduction in your tax bill. Instead, you are reducing your income. However, it is a nice bonus to get a little help reducing your tax liability when you give your items away. Many people find that the reduction in income is almost as helpful as trying to raise cash with a yard sale.
The time and effort that go into a yard sale are rarely repaid with the proceeds – and you may not sell everything anyway. Many people find it much easier to just donate the goods, and take the tax deduction. It creates a winning situation for everyone involved.