GIVING GOODS TO CHARITY
When I’m sitting in an income tax audit and produce an old, crumpled up Goodwill receipt with only “4 bags of household goods” as detail, I know what’s coming. They ask for more evidence and substantiation for the deduction – seems reasonable to me. More often than not, there is none.
Most of us give our old clothes, furniture, etc to the Goodwill, Salvation Army or similar organization. Most all of us deduct the value of these goods on our tax returns. While the IRS is fine with the idea, the details can become problematic.
Want to nail down your deduction? Here’s what you need to know and do.
First and most important – the organization has to be a qualified, non-profit organization, i.e., the Goodwill or Orange County Child Abuse Prevention Center.
Next, follow the rules outlined below.
NON CASH DONATION VALUED AT LESS THAN $500:
The goods donated must be in “good used condition or better”.
Get a receipt or other written acknowledgment showing the date, name and address of the organization, condition of the goods and value you are assigning to those items.
A detailed itemization is strongly suggested.
Take pictures!
If a receipt is impractical and the value is less than $250, write out your own receipt detailing the donation and circumstances.
NON CASH DONATION VALUED FROM $500 TO $5,000:
Written acknowledgment from the charity showing the date, name and address of the organization, condition of the goods and value you are assigning to those items.
Make a record of when and how you acquired each item, the amount paid, the donated value and how you arrived at that value. (Not as hard as it sounds – estimated date; “purchase”; $5000; $500; Thrift Store selling price.)
Take pictures!
NON CASH DONATION OF A SINGLE ITEM VALUED OVER $5,000:
Written acknowledgment from the charity showing the date, name and address of the organization, condition of the goods and value you are assigning to those items.
List the items by type of item being donated:
Art valued at $20,000 or less * Art valued at more than $20,000 * Collectibles * Qualified Conservation Contribution * Other Real Property * Intellectual Property * Equipment * Securities * Other.
Detailed description of the property.
If tangible property – detailed description of the condition of the property.
Appraised Fair Market Value at date of gift.
Date acquired
How acquired
Cost
For Bargain Sales – the amount received.
Amount claimed.
Average trading price – if applicable.
IRS Form 8283 signed by you and the appraiser.
A signed acknowledgement from the charity on Form 8283.
There are more rules for various other categories. If you’re planning on giving anything large or unusual, call me so you can be sure to cement down the deduction.
Sure it can be complicated, however, when you do donate and don’t take the time to do it right, you’re also giving a gift to Uncle Sam in the form of higher tax bills. My suggestion – take the time and take the deduction.
