For many taxpayers, it's a win-win scenario: You can give unwanted clothing to a good cause and get a tax break for it. If you itemize your deductions, the value of the clothing you donate reduces your taxable income and total tax bill. However, there are some limits on deductions for charitable donations and you must value the clothing appropriately.
Limitations on Donations
There are some limitations regarding who can claim charitable donations as tax deductions and how much they can claim. Donations for charitable clothing are reported as itemized deductions on tax form 1040. To get the deduction, you must forgo the standard deduction and itemize your deductions instead. The Internal Revenue Service does put a cap on how large of a deduction you can claim. Contributions to charities, universities and religious organizations cannot exceed 50 percent of your adjusted gross income.
The Recipient Matters
To get a tax deduction for your donation, you need to give it to the right place. Only donations to registered 501(c)(3) organizations will net you a tax deduction. Most nonprofits, charities, schools and religious organizations maintain a 501(c)(3) status. If you're not sure if your intended recipient qualifies, the IRS offers a free online tool that allows you to check the recipient against a database of qualified organizations.
Valuing the Clothing
You should list the amount of your clothing donation at fair market value. In the case of clothing donations, fair market value means the amount that a typical buyer will pay for the clothing you donate. Many charitable organizations provide valuation guides with appropriate price ranges for general clothing items. If you donate an out-of-the-ordinary item, a fur coat or a designer dress, it's ok to list it at a higher value. However, you should maintain documentation, like examples of comparable sales, that support the valuation.
Reporting Your Donations
If you have less than $500 worth of charitable donations, you can fill out your donation information on Schedule A of Form 1040. However, taxpayers with more than $500 worth of donations need to fill out Form 8283. If you're claiming a value of $500 or more for any single item you donated, you must include a qualified appraisal with the return. Otherwise, you should keep documentation on hand that supports your donations. Most charitable organizations will issue you a receipt that verifies your donation. It's also a good idea to snap pictures of bags of clothes or clothing individual items.
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