If you itemize deductions, you can write off donations to charity, including non-cash, "in-kind" contributions. There's no absolute dollar limit on the size of your non-cash deduction. Your total combined cash and non-cash donations for the year are limited by your adjusted gross income, however. You can't claim more in a given year than 50 percent of your AGI, though you can roll over the rest to a later year.
The IRS classifies non-cash donations based on whether selling the item would generate income tax, short-term capital gains or long-term capital gains. In the first two cases, you usually price your donation equal to the purchase price, not current value: A $1,000 antique you bought for $800 is an $800 deduction. With long-term capital gains, your limit is usually 30 percent of your AGI: If you make $90,000 and donate a $40,000 painting, for instance, all you can deduct this year is $27,000.
Fair Market Value
You can never deduct more than the fair market value of whatever you donated. Fair market value is what an interested buyer would pay if she was knowledgeable about the market, whether the market is for cars, jewelry or antiques. With collectibles or cars, you can use price guides to determine the value. Above $5,000, however, you have to pay for an appraisal to justify the value. With some items, such as household furniture or clothes, you need an appraisal if the value exceeds $500.
If you donate inventory from your business, your maximum deduction is the fair market value or the basis, whichever is smaller. Basis is the cost of the inventory. If the inventory is so old you no longer carry the cost on the books, your basis is zero and you get no deduction. Donating food inventory follows a more complicated formula, but can never be more than 10 percent of your net income for the year.
Qualified Conservation Contribution
The IRS applies special rules if you donate land for conservation, whether it's to protect the environment, provide outdoor recreation or preserve a historic building. Usually your deduction is limited to 50 percent of your AGI, after you subtract all your other donations. IRS publication 526 details how to juggle all the figures together -- the 50 percent over-all deduction limit, the conservation limit and several other restrictions -- to determine the most you can claim this year.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.