Ahhhh, It’s that time of year again.
The sun is out, the birds are chirping, flowers are blooming, and you’re stuck inside cleaning.
You’ve dug through the kitchen, braved the closets, and finally you have conquered the kid’s room! Now what? You’ve got all this stuff you don’t use anymore bagged up, loaded in the car and ready to go to your local charity!
STOP RIGHT THERE!
Depending on where you’re taking these things, you could write them off on your taxes! That means you can them tax deductible, which should reduce your tax liability and may even award you more money on your tax refund! Who doesn’t love a little extra cash for giving to the charities they care about? Below I’ve compiled a comprehensive guide for how to go about making your charitable donations tax deductible.
Step One: Call Ahead
First call your preferred venue (Goodwill, Salvation Army, local charities, etc.) and see if they are a qualified organization to provide tax deduction forms or receipts for donations. Some guaranteed qualified organizations are:
•Churches and religious organizations
•Non-profit, volunteer fire company
•War veterans organizations
•Disaster relief organizations
•Nonprofit schools and hospitals
•The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America
Step Two: Itemizing
Catalog everything you are donating, BEFORE you donate it. You need to do this prior to delivering your donations because it’s near impossible to remember everything you bagged up afterwards, unless you only brought a few items. And it is actually illegal for a charity to tell you what your item is worth. So grab a pen and paper, and write down each item and individually record how much YOU would pay for that item (based on its current condition). This determination of value is referred to as the Fair Market Value.
If you have several of a similar item that are all in about the same condition you can lump these together, just make sure that you know how many you have. If you’re not sure how much something might be worth, I suggest looking it up online. Here are some other ways to determine the value of your donations:
- Goodwill also has an online Value Guide or assisting with donation values. These prices are an average of what their stores charge per item.
- Use the IRS Publication 561 page to help determine the value of charitable donations.
- TurboTax provides a free service for calculating and adding Charitable Donations on your tax forms, which can be operated on a mobile phone. This is called ItsDeductible.
Limitations
There are some circumstances and limitations for writing off charitable donations on your taxes, I’ll list all the ones that I can find below:
“In general, contributions to charitable organizations may be deducted up to 50 percent of adjusted gross income computed without regard to net operating loss carry backs.”
Items and circumstances in which you cannot deduct from your taxes:
- A contribution to a specific individual,
- A contribution to a non-qualified organization,
- The part of a contribution from which you receive or expect to receive a benefit,
- The value of your time or services,
- Your personal expenses,
- A qualified charitable distribution from an individual retirement arrangement (IRA),
Step Three: Donate!
Embrace that feeling of freedom when you shed all the junk of your past! And don’t forget your receipt!
Items you can donate will vary per venue or organization, but the items that are able to be deductible are listed below in two categories:
Household Property:
- Furniture
- Home Furnishings
- Clothing/Linens
- Electronics
- Appliances
- Books
Appreciated Property:
- Valuable Antiques
- Paintings
- Jewelry
- Objects of Art
- Collections
- Real Estate
Please note that you can only receive a deduction on items that are in “good used condition” or better. If an item is in Less-Than-Good condition and valued at over $500, you must have it formally appraised. For Appreciated Property donations it pays to keep that property the full 12 months before giving it away. For property held one year or less, IRS only allows you to claim a deduction on the price you paid for it. Remember that anything you believe is worth $5,000 or more, you’ll need to get a formal appraisal.
Most places will only give you your tax deduction receipt at the time of the donation. As soon as you donate, request your tax deduction form or receipt.
Step Four: The Paperwork
The form you’ll need for claiming charitable donations of money or property is the 1040 tax form. Federal income tax forms 1040EZ and 1040A don’t allow for it, because those do not allow for itemized deductions.
You’ll be using Schedule A or “Gifts to Charity” on the 1040 income tax form. Enter your non-cash donations of Household Property on line 17.
However, if your contributions are between $500 to $5,000, you must also use income tax forms 8283. If they are over $5,000 you must fill out Section B of tax form 8283.
After adding in the rest of your deductions, put the final total on line 40. I’d say as a rule of thumb that if you are wanting to claim more than $20 for a single item that you should be able to provide the original receipt as well as some updated pictures of the items condition upon donation. You won’t need to provide these with your income tax form, but in the case of speculation you may need to provide them later on.
That’s it! If only all of spring cleaning were that easy!
Please note that I am not a tax advisor or accountant, just an expert thrifter! For more information, or special circumstances I encourage you to visit the IRS page on Charitable Donations. Let me know if this was helpful to you in the comments below!
To learn more about your donations to thrift stores and the importance of shopping second hand, check out my blog post Five Reasons Why Thrift Shopping is Saving The World.
Stay thrifty,
Megan@ThriftingAdrift