Your favorite charity may be happy to get your old microwave, but you may not be as pleased with the tax benefits. In-kind donations aren't as simple to write off on your taxes as cash. You may end up with nothing to show for your donation but the joy of giving and more space in your kitchen.
The IRS regards household items, such as lamps, televisions, washing machines and food processors, differently from other in-kind donations. You can claim a donation for a damaged old car, but used appliances aren't deductible unless they're in good condition. If your dryer is broken, you can't claim a deduction, even if the charity repairs it. The exception is if the item is worth more than $500, even in poor condition: in that case, you can take the write-off.
Fair Market Value
Your tax deduction depends on the appliance's fair market value -- what you could sell it for if the buyer knew its age and defects. Fair market value is usually much less than the purchase price, unless you donate the appliance right after you bought it. Unlike used cars, used appliances don't have price guides. To prove the value of your donation, you can use the price the charity sold it for, or the cost of similar appliances in thrift stores. If you claim a deduction for an appliance greater than $500, you must have the appliance appraised first.
While the IRS audits only about 1 percent of returns, it's good to have proof of your deductions, just in case. For any non-cash donation, you need a receipt giving the organization's name, the date you made the donation and a reasonably detailed description of the appliance. You also need records showing how you figured out what the appliance was worth, including a copy of any appraisal reports. The bigger the write-off, the more detailed the paperwork required.
You can't deduct donations unless you itemize deductions on Schedule A. The IRS limits how much you can write off: the maximum in any year is 50 percent of your adjusted gross income, and in some cases it's as little as 30 percent. For example, you give half your AGI to charity, and then you donate the appliance as well, you can't take a write-off for it. You can, however, carry over the deduction until next year and -- if next year's donations are less than 50 percent -- claim it then.
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