Just because you're not giving cash to charity doesn't mean you're not allowed to claim a tax break for your donations. In fact, the Internal Revenue Service specifically allows you to deduct the fair market value of the item, which is the amount a willing buyer would pay a willing seller, assuming they both have full information about the item. But that's where the IRS's helpfulness ends, because it doesn't give any further guidance as to how to determine the fair market value, other than to say it's usually much lower than for a new item. Instead, you have to rely on your own research.
Check local thrift shops for similar items to get an estimate of what your item might be worth. For example, if you're donating an old couch, check some local thrift stores to see what similar items are selling for.
Look up the range of prices that a reputable charity, like the Salvation Army or Goodwill, lists for similar items on its donor price guide. These are available online and can give you an idea of how much you can deduct.
Take pictures to document the condition of the items that you're donating. You don't need to mail them in with your tax return, but you should keep them in case your return is audited.
Have a certified appraisal done on any items that are worth more than $5,000. If you're not being quite that generous, you're not required to get an appraisal, though it might help if you're donating an item that is unusual in its value.
- You can only deduct charitable contributions if you itemize your deductions.
- If you're donating household items, like used clothing, electronics, furniture or linens, the items must be in good condition or better. The only way you can claim a deduction for a lesser item is if you get a certified appraisal that says it's worth more than $500.
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