If you can't find the shirt you want to wear because your dresser is so stuffed, it might be time to donate some of your extra clothing. If making your closet navigable isn't incentive enough, Uncle Sam might be able to kick in some extra dollars on your tax return to make it worth your while.
To claim a deduction for donated clothing, you must give it to a qualified charity. Passing it down to your kid brother or your niece doesn't work. In addition, it must be in good used condition or better. If you have clothing in worse condition, you can't deduct it. The only exception to the requirement is for valuable clothing. If you have have a piece of clothing worth more than $500 and you get a qualified appraisal of the item, you are permitted to claim a deduction regardless of the condition.
Valuing Your Deduction
Typically, you have to use the fair market value of your clothing, which is the price a willing buyer and willing seller would agree to on the open market. Usually, this is far below what the item would cost new, even if it's still in good condition. However, the IRS does not offer any specific formulas for figuring the value. If you are unsure of the fair market value for your clothing, look at thrift stores or secondhand shops in your area. Also, many charities offer approximate price ranges.
Your clothing donation by itself likely won't approach the limits applied to charitable donations. For all contributions, you can't exceed 50 percent of your adjusted gross income. If you donate to certain charities, such as veterans' organizations and certain private non-operating foundations, your contributions can't exceed 30 percent of your AGI. If your donations exceed the limits, you can carry forward the excess up to five years in the future.
When you donate clothing, the records you need to keep depend on the value of the items you donated. For donations under $250, you should get a receipt showing the name of the charitable organization, the date and location you made the contribution, and a reasonably detailed description of what you donated. However, if it's not reasonable to get a receipt, such as if you left the clothes in a donation drop box, you don't need one. For your own records, you always need to keep a record of the fair market value of the items. If your donation exceeds $500, you must get a written receipt that also indicates whether you received anything in return for your donation. Donations over $5,000 must be supported by an appraisal.
Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."