Now might be the perfect time to clean out your closets and garage.
If you give your gently used clothing and household items to charitable organizations, the New Jersey State Society of Certified Public Accountants (NJSCPA) advises you don’t discard potentially valuable tax deductions with your donation:
Find a Good Home for Your Donations
The first step in making sure a donation is tax deductible is to be certain the contribution goes to a qualified organization. Generally, qualified organizations include nonprofit groups that are religious, charitable, educational, scientific or literary in purpose, as well as child welfare or animal welfare groups. Civic leagues, social and sports clubs, chambers of commerce and political organizations are not considered qualified organizations.
A complete list of organizations can be found in Publication 78 on the Internal Revenue Service (IRS) website, www.IRS.gov.
Household goods or clothing must be in good, used condition. For deductions under $500, you need to place a fair market value on the items being donated. The fair market value of used furniture and appliances is usually much lower than the original purchase price because it is worn or out of style. The same holds true for used clothing and other personal items.
Determining the Value Is Important
There are no formulas for valuing clothing items, but a good estimation would be the price paid for like items in consignment or thrift shops. Online resources such as CraigsList.com or AppliancExchange.com may be a good resource to help value appliances. Additionally, Goodwill Industries International posts an article under the Get Involved section on its website – www.goodwill.org – that summarizes the values of clothing and household items. The Salvation Army does something similar on its website – www.salvationarmyusa.org – in the Ways to Give section.
Don’t Forget the IRS
One of the most important things to remember is to document your donations. If you leave donations on the curb and the qualified nonprofit leaves a blank receipt, attach a list of what you donated, include the fair market value on the list and take photos. You should keep this with your tax information. It is not necessary to include with your tax return, but if you are audited in the future, you have the documentation to support the deduction.
If you really want to empty your garage and donate a car or boat to a qualified organization, its fair market value must be determined. There are online guides containing complete dealer sales prices or dealer average prices. Two resources are www.edmunds.com and www.bluebook.com. An accepted measure would be a private party sale, not dealer retail value. However, the fair market value may be less than this amount if the vehicle has engine trouble or other excessive wear. Your deduction may also be limited to the gross proceeds from its sale if the vehicle is sold by the qualified organization. This rule applies if the claimed value is more than $500.
To donate collections of books, stamps, coins or other valuable collectibles, a qualified appraisal is often required. As the value of your donation goes up, so does the complexity of required documentation. If you want to be sure your good deed is rewarded, check with a local CPA to be sure you have the right documentation to make your tax-deductible contribution.
If you don’t have a CPA, you can easily locate one online using the NJSCPA’s free, online Find-A-CPA service. Just go to www.ifndacpa.org, and in a few clicks you can locate a highly qualified professional who can assist you.
For more smart money tips and information on various personal financial matters, visit the NJSCPA’s public service website at www.MoneyMattersNJ.com. While visiting, you can subscribe to Your Money Matters, the NJSCPA’s free, monthly email newsletter to receive valuable personal financial planning advice throughout the year.
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