When you are declutteriing your home if items are still in good shape and useable, consider donating to a thrift store. If you itemize your deductions on your tax forms, you can include deductions for items donated. There are some things to know to be sure you are entering the correct information and have the right documentation.
When you drop off items at the make sure you get a receipt for the items your drop off. If you donate several items such as bags of clothing, the receipt will likely list the number of bags instead of individual items.
Your “junk” may be worth more than you think. There are resources that give suggestions on how to figure out how much certain items are worth to claim as deductions. As with other deductions, it is important to keep the receipts for donated items in case you are audited, especially if the deduction claimed is quite large.
Taxpayers are able to deduct fair market value of clothing and household goods. Fair market value is defined as the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
There is not an exact formula or method for you to establish fair market values, so what you claim is completely subjective. The main rules when determining values can be found in the Publication 526, Charitable Contributions.
In order to be able to claim deductions for clothing and household items, the organization needs to have tax-exempt state with the IRS. To make sure they are a qualified organization you can ask them or check the IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations.
When assigning fair market value to the items you are donating, there are some things to keep in mind. The fair market you claim cannot be more than the original cost of the item. A suggestion when valuating used clothing/items, is to use 25 percent of the original purchase price as a guide when determining the donated value.
Keep a detailed record of your donated items, including the number of items and condition of them, the dates you bought the items or approximate dates and original purchase prices. You should also keep signed and dated receipts you received from the organization. If you donate a number of items or items that worth a lot of money, it is advisable to take photos or videos showing the items in case you are audited.
The deductions should be reported on Schedule A of Form 1040. The value of your charitable contribution cannot be more than 50 percent of your adjusted income in any single year. If your donations exceed the 50 percent limit, they can be carried to future years. If your donations are worth more than $500, ,you must include a Form 8283, Noncash Charitable Contributions form with your tax return.
If you are cleaning out an entire home due to a death or other circumstance, you donation could be quite large. If your claimed deduction is more than $5,000, you must get an appraisal from a qualified appraiser and attach an appraisal summary to your tax return.
Donating items you no longer use or need is a great way to get tax deductions, although there are some tips to know about how to claim the deductions.