Many people find spring the right time to clean out their closets and garages. Damage from the recent severe weather provides the perfect time for you to donate your gently used, unwanted items. If you give your items to charitable organizations, members of the Oklahoma Society of Certified Public Accountants advise that you don’t discard valuable tax deductions with your donation.
The first step in making sure a donation is tax deductible is to be certain the contribution goes to a qualified organization. Generally, qualified organizations include nonprofit groups that are religious, charitable, educational, scientific or literary in purpose, or that work to prevent cruelty to children or animals. Civic leagues, social and sports clubs, chambers of commerce and political organizations are notconsidered qualified organizations.
A complete list of organizations can be found in Publication 78 on the IRS Web site, www.IRS.gov. Area organizations that you may consider are local branches of national nonprofits. For example, visit www.SalvationArmyUSA.orgwww.RedCross.org to find donation centers near you.
Household goods or clothing must be in good, used condition. For deductions under $500, you need to place a fair market value on the items being donated. The fair market value of used furniture and appliances is usually much lower than the original purchase price because it is worn or out-of-style. The same holds true for used clothing and other personal items.
There are no formulas for valuing clothing items, but a good estimation would be the price paid for like items in consignment or thrift shops. Online resources such as CraigsList.com or appliancexchange.com may be a good resource to help value appliances. Additionally, Goodwill Industries International posts an article under the Get Involved section on its website –www.goodwill.org – that breaks down the values of clothing and household items.
One of the most important things to remember is to document your donations. If you leave donations on the curb and the qualified nonprofit leaves a blank receipt, attach a list of what you donated, include the fair market value on the list, and take photos. You should keep this with your tax information. It is not necessary to include with your tax return, but if you are audited in the future, you have the documentation to explain the deduction.
If you really want to empty your garage and donate a car or boat to a qualified organization, its fair market value must be determined. There are online guides containing complete dealer sales prices or dealer average prices. Two resources arewww.edmunds.com and www.bluebook.com. An accepted measure is for a private party sale, not dealer retail value. However, the fair market value may be less than this amount if the vehicle has engine trouble or other excessive wear. Your deduction may also be limited to the gross proceeds from its sale if the vehicle is sold by the qualified organization. This rule applies if the claimed value is more than $500.
To donate collections of books, stamps, coins or other valuable artifacts, a qualified appraisal is often required. As the value of your donation goes up, so does the complexity of required documentation. If you want to be sure your good deed is rewarded, you may want to check with a local CPA to be sure you have the right documentation to make your tax-deductible contribution.
For more money tips, a free CPA referral or free 30-minute consultation, visit www.KnowWhatCounts.org.