Donating to qualified charities is a great way to increase your tax deductions. But when you donate goods, rather than cash, how do you know how much to deduct?
In most cases, the donor assigns the value of the item. However, you need to make an accurate assessment of what the item is actually worth, not just pick a number out of thin air. Here are a few guidelines you’ll want to follow when determining how much your charitable donations are worth.
- Condition matters. Evaluate the condition of each donated item separately, and consider that condition (such as new, good, poor, etc.) when assigning a value.
- Act like a seller. Do your research as though you were selling the item, rather than donating it. Looking at similar items in thrift shops, classified ads, and online sales forums can give you a clear picture of what your item is currently worth. For commercial items such as machinery, you can look at trade publications to assess the value of similar equipment.
- Check online donation guides. There are a number of different valuation guides available online, including several published by charitable organizations such as The Salvation Army and Goodwill. These lists indicate a price range for specific items and can be very helpful as you assign a value to your donation.
And remember, if an item’s value is greater than $5,000, the IRS requires a professional appraisal to determine the true value of the item. For that reason, we recommend that you have a professional appraisal done on antiques, jewelry, art, or any other item that may have increased in value since the time of acquisition. This will provide you with adequate documentation should there be a question regarding the value of a charitable donation deduction on your tax return.
Have questions? Taxation Solutions, Inc. has answers! Give us a call today to learn more about deductions, charitable contributions, and your taxes.