In light of the recent report by the Treasury Inspector Generalfor Tax Administration which found that “Taxpayers Don’t Comply With Reporting Requirements for NoncashCharitable Contributions” I thought it would be appropriateto review the rules for claiming a “non-cash contribution”.
You can claim a deduction for the “fair market value” ofproperty, including used items, donated to charity. According to the IRS, fair market value isthe price a “willing, knowledgeable buyerwould pay a willing, knowledgeable seller when neither has to buy or sell.”
You areresponsible for determining the fair market value of the items you aredonating. The charity to which you make the donation isnot required to, and in most cases will not, provide you with a value. Click here for the Salvation Army valuation guide.
If the total value of items donated to a charity in a single dayis more than $250.00 you must have awritten acknowledgement from the donee organization with the name andaddress of the charity, the date of the contribution, and a description of theitems donated. The acknowledgement must also indicate whether you were provided anygoods or services by the charity in exchange for the donation (this is veryimportant).
You must complete and attach to your Form 1040 IRS Form 8283 ifyou are deducting “non-cash” contributions totaling more than $500.00. The following information will be needed:
• the name and address of the charity(ies) towhom you made the donation(s), • the date of the contribution(s),• the fair market value of the items donated,and• how you determined the value – i.e. “SalvationArmy valuation guide”
If any one individualitem has a value of more than $500.00 you must also list
• the date you acquired the property• how you acquired the property – i.e. purchase,gift, inheritance, exchange• the cost or adjusted basis of the property
If any one individual item has a value of more than $5,000.00you must provide a written appraisal of the item and complete Section B of IRSForm 8283. The appraisal must be made bya “qualified” appraiser who has earned an appraisal designation from arecognized professional organization or has otherwise met minimum education andexperience requirements prescribed by IRS regulations, regularly performsappraisals for compensation, demonstrates verifiable education and experiencein valuing the type of property being appraised, and has not been prohibitedfrom practicing before the IRS at any time during the 3-year period prior tothe date of the appraisal. To find aqualified appraiser go to www.appraisers.org, the website of theAmerican Society of Appraisers.
The cost of the appraisal is not included in the amount of thecharitable donation. You can, however,deduct the appraisal fee as a “miscellaneous” itemized deduction, subject tothe 2% of AGI limitation.
Whenever you contribute used appliances, electronics, books,clothing, furniture or household items you should always make and keep a detailed listing of the items donated with thecondition and value of each set of items (i.e. 6 pairs of men’s pants, goodcondition, $60.00, 5 pairs of men’s shoes, good condition, $75.00). You may want to attach a copy of the listingto Form 8283 when filing your Form 1040.
Youcannot deduct the contribution of a used item of clothing or household item toa church or charity unless the item is in at least "good" condition (except for a singlesuch item with a documented appraised value of more than $500). Donationsof clothing and household items with a minimal monetary value, such as usedsocks or underwear, are also not deductible.
When donating used clothes and household items to charity youshould go with the ‘old reliables’ like Goodwill Industries, the SalvationArmy, Vietnam Veterans of America or your local church – this way you are sureto be giving your items to a legitimate charity. In many cases the charity willcome to you to pick up your donations. And if you are putting your donations ina “drop-off box” make sure the name of the charity is clearly indicated on thebox. While these boxes may be convenient it is “more better” to drop off yourdonation at a local Goodwill or Salvation Army store or donation center, whereyou can get a signed receipt.”
If you purchase new items to contribute to a food, toy orclothing you can deduct the actual cost of the items donated. The same reporting and documentationrequirements discussed above for used items will apply. You should make a separate purchase of theitems you will donate – do not group together with the purchase of items foryour personal use – and save the store receipt.
Beadvised that you must donate the items to a qualified charity. You cannot claim a deduction for clothes orother items given directly to an individual or family – such as a winter coat you give toa homeless person, or foodstuffs given to a family whose home has burned downor was destroyed by SANDY. You must givethe item to the Salvation Army or the Red Cross, who will in turn distribute itto a needy individual or family.
When you donate a motor vehicle (car, motorcycle, boat, orairplane) to a church or charity the amount you can deduct depends on what theorganization does with the donated vehicle.
(1) If the organization sells the vehicle without significantinterim use or material improvement your tax deduction is limited to the grossproceeds from the sale.
(2) If the organization intends to temporarily or permanentlyuse the vehicle in its operations, or make "material" improvements tothe vehicle before selling it, or sell the car to a "needy"individual at a price that is significantly below market value, or give the carto such an individual, you can deduct the "fair market value" of thevehicle.
You can use the "private party value" for the vehicle,adjusted for mileage and condition, as listed in the Kelly Blue Book (www.kbb.com)or a similar established used vehicle pricing guide. As discussed above with other “non-cash”contributions, if the fair market value of the vehicle is more than $5,000.00you must obtain a formal appraisal.
In order to claim a deduction of more than $500.00 for donatinga motor vehicle to charity, you mustinclude Copy B of the IRS Form 1098-C, which is completed by the charity, withthe filing of your Form 1040.
The Form 1098-C will include the name and TaxpayerIdentification Number of the donee organization, the vehicle identificationnumber, the date of contribution, and information on what the charity did withthe vehicle. Form 1098-C must be issuedwithin 30 days of either the date of the contribution or the date of thedisposition of the vehicle by the donee organization. Thecharity can give you a statement in lieu of Form 1098-C as long as it containsall the necessary information discussed above.
Any questions?
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