…to be generous! Many of us use the opportunity of the holidays to clean out our closets, and to donate gently-used items to deserving charities. In most cases, that generosity can result in a tax deduction – if you follow the rules.
If you’re donating clothing and household items, they must be in good used condition or better – no torn jeans unless that’s how they looked when you purchased them! Get a receipt from the charity, but don’t be surprised if they don’t assign a value to the donated items – or even itemize them. It’s up to you to make a list (and check it twice) of what you’re donating, and to estimate its fair market value at the time of the gift. There are resources available to help you with that – a good one is ItsDeductibleOnline.com – or go through the thrift shop to compare prices. Remember, if you’re ever audited, you’ll need some documentation of your valuation methodology. If the year’s total noncash donations exceed $500, you’ll need even more documentation – just ask your CPA or other tax provider what the rules are.
But don’t let tax law or benefits rule your decision – the gift should come from the heart, even while IRS gives you some lovely tax benefits for being generous.