Whether it’s cleaning out your closets to make room for new clothes or donating old furniture that you just don’t need anymore, donating your used items to charity can help someone in need. It can also help you on your taxes because you may be able to claim a charitable donation deduction. To determine the IRS tax donation deduction for your gift to charity, you need to know the rules for valuing your items.
TL;DR (Too Long; Didn't Read)
Look at the price that similar items are being sold for, such as in a thrift store, to find the value of something you are donating to charity.
Estimate Value for Taxes
The tax code uses the fair market value of items to determine how much you can deduct on your taxes for your donation. The fair market value is defined as the price a willing buyer would pay a willing seller if both have full knowledge of the item. Typically, the fair market value of used items, such as clothing or household goods, is substantially less than the price of a similar new item. While the IRS specifically says that there isn’t a formula that it uses to determine the fair market value, you should look at what similar used goods are selling for in second-hand stores in your area to determine the value.
Appraisals Required for Expensive Items
If you donate an item or group of similar items that you think is worth more than $5,000, you must get a certified appraisal of the item or items to validate your valuation. For example, if you donate a painting that you think is worth $6,000, the IRS won’t just take your word for it. You must have an appraiser certify that the painting is in fact worth that much money.
Standard Deduction Increase in 2018
The rules for valuing donated property haven’t changed from 2017 to 2018, but another tax law change will affect who can take advantage of the charitable donations deduction. You can only claim donations to charity as a deduction on your taxes if you itemize your deductions, which means giving up your standard deduction. However, in 2018 the standard deduction increased substantially for all filing statuses, making it less likely that taxpayers will itemize. The standard deduction increased to $12,000 for single filers, $18,000 for heads of household and $24,000 for married couples filing a joint return.
Lower Standard Deduction in 2017
If you’re still filing your 2017 return, the chance that it will be worthwhile to itemize and claim your charitable donations increases because of the lower standard deduction. For 2017 tax returns, the standard deduction is just over half of what it was increased to in 2018. The standard deduction is $6,350 for singles, $9,350 for heads of household and $12,700 for married couples filing jointly.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."