Charitable contributions are voluntary donations made to nonprofit organizations. The IRS allows deductions for donations made to nonprofit organizations that are tax-exempt under federal tax codes, such as 501(c)(3) organizations that are operated for charitable purposes, if you don’t receive anything of value or benefit from the donation. Nonprofits provide you with acknowledgement letters or receipts for your donations but can't assess a value for the items. The IRS requires you to estimate the fair market value of donated items to claim a charitable deduction on your income tax return.
You can claim deductions for donations made to qualified tax-exempt organizations whose purpose is charitable, religious, educational, scientific, literary, child- and animal-cruelty prevention or the promotion of sports competition. Donated items include vehicles, household items, clothing, business inventory, stocks and other securities, patents and interest in property. Donated used items must be in good condition or better, unless the charitable deduction claimed for the item is $500 or more and an appraisal is included with the return. The IRS requires receipts for all charitable donations for which you claim a deduction.
Fair Market Value
The IRS requires you to determine what an item’s fair market value was on the donation date. The IRS defines fair market value as the price the item would sell for on the open market or to a buyer who knows the condition of the item. Assume that donated items are worth less than the original price and consider the age, condition, style and use of the item when determining FMV. Older items might be less valuable, but antiques might be more valuable. Restrictions placed on the use or sale of the donated item and the replacement cost, which is the price of the item new minus depreciation, also affect FMV. If an appraisal is needed to determine FMV, the appraisal fee is not deductible.
Household Goods and Clothing
Furniture, linens, appliances and clothing are valued much lower than the prices paid for the items when new. The IRS recommends checking the pricing at consignment shops for help with estimating value. Thrift stores and used item sale listings also provide pricing information. Large nonprofits such as The Salvation Army and Goodwill Foundation provide donation value guides to help donors. The guides provide prices the organizations' thrift stores charge for different types of household goods, furniture and clothing sold.
Cars, Boats and Airplanes
Regional monthly guides or online publications, such as Kelley Blue Book, list dealer sale prices for used vehicles by make and year with suggestions for adjusting prices for additions, condition and mileage. The FMV of a donated boat, airplane or car shouldn't be more than the sale amount from recent private, no dealer, sales. A marine surveyor should assess the FMV of a boat, if not small and inexpensive, according to the IRS. The IRS allows a deduction for the FMV on some vehicle donations. If the claimed value of the vehicle exceeds $500, though, the deduction allowed is for the gross proceeds remaining after the nonprofit sells the item.
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