Getting rid of that big pile of clothes that you never wear anymore? Or perhaps you’re purchasing a new computer or car and want your old one to be put to good use. Either way, donating might just be a good way to reduce your taxable income. Donating may certainly add up for a nice deduction!
When donating things other than cash, especially in large quantities, there are several steps that must be followed so you don’t lose your eligibility for the deduction!
The rules to substantiate your donations kick in when your total contributions (noncash) are greater than $500. Once this occurs, you are required to keep written records for each item donated. These records must include:
- The approximate date that the property was acquired, as well as how it was acquired (bought, gifted, won, etc.);
- A description of the property in reasonable detail;
- The cost/basis of the property;
- The fair market value of the property at the time it was donated; and
- The method used in determining the property’s fair market value.
In addition to these rules, clothing or “household items” may not be deducted unless the items are in good used condition or better. One way to keep record of this is to have pictures of the items at time of donation as well as keeping any appraisal records for the item.
Next, donated items valued greater than $5,000 must also have a “qualified appraisal” and a fully completed appraisal summary must be attached to your tax return.
There are horror stories of some taxpayers losing significant charitable deductions due to poor records. Don’t add to them! Be sure to follow the rules and keep all your receipts!
Feel free to contact me at email@example.com if you have any questions or concerns regarding your donations.