How Much of Non-Cash Donations Are Deductible on Income Tax?

You have to itemize your deductions to claim donations to charity.

You have to itemize your deductions to claim donations to charity.

Whether its some old clothes or an old car in your garage, most people have items they don't use on a regular basis. If you decide to give these items to charity, you can claim a deduction on your taxes. However, you need to know the rules for valuing your non-cash donation and the limitations with regard to how much you can deduct.

Deduction Value

The general rule is you can deduct the fair market value of your non-cash donations to charity. For example, if you donate a sleeping bag that you've owned for years to a homeless shelter, you can deduct the fair market value of that sleeping bag -- the price someone might pay you for it if you offered it for sale. However, there are several significant exceptions to this rule. For example, if you donate property that has increased in value over what you paid for it, you can't deduct the increase if you've held the property for less than one year. For example, if you buy cereal on sale and donate it the next day, you can only deduct what you paid, not the fair market value.

Tangible Personal Property

Special rules apply to tangible person property, which is any item besides land or buildings: it includes such items as artwork, jewelry and baseball cards. When you donate such property, you can deduct only what you paid for it unless the charity is going to use it in its mission. For example, if you donate baseball cards to a shelter, since the shelter can't use them to put a roof over homeless people's heads, you can deduct only what you paid for them. However, if you donate them to an American history museum that will put them on display because of their historical significance, you can deduct the fair market value.

Vehicle Donations

More special rules apply when you donate a vehicle, such as a car or boat. If you donate the vehicle to a charity that sells it, you're limited to deducting only what the charity receives for it. For example, if your $8,000 car sells at auction for $3,000, you can deduct only $3,000. However, if you find a charity that will use your car rather than sell it, you can deduct the fair market value. For example, if you donate that same $8,000 car to a charity that uses it to shuttle the elderly to and from hospitals, you can deduct $8,000.

AGI Limits

The amount of your deduction is limited based on your adjusted gross income. If you're not claiming more for the non-cash donation than you paid for it, the amount you can deduct is usually limited to 50 percent of your adjusted gross income. However, if you make donations to a so-called 30-percent limit organization, your deduction is limited to -- not surprisingly -- 30 percent. These organizations include veterans groups, fraternal societies and nonprofit cemeteries. If the property has increased in value, you deduction can't exceed 30 percent of your adjusted gross income if you donated to a 50-percent limit organization or 20 percent if you donated to a 30-percent limit organization. If your donation exceeds these limits, you can carry over the excess for up to five tax years.

 

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