tax deduction for non cash donation

How to Deduct Donations of Goods from Your Taxes


by

26 June,2012

When many of us think of making charitable donations, we think of cash. However, it’s also possible to donate clothing, household goods, and other items to charity — and receive a tax deduction.

Recently, I took almost $700 worth of clothes, shoes, and accessories to the local religious thrift store after cleaning out my closet, my husband’s closet, and my son’s closet. Because it was such a large donation, I decided to go ahead and get a receipt. I can itemize the deduction on my taxes next year.

Deducting Non-Money Donations

You can’t just take your trash to the thrift store and expect to be able to deduct its value from your taxes. The IRS has rules for charitable donations. Some of the things you need to remember as you donate your goods include:

  • The charity must be a tax-exempt charity
  • The goods should be in good condition
  • You will need a receipt from the organization, showing the worth of the items donated
  • You will need to figure worth on current market value — not what you actually paid for the items
  • The deduction must be itemized

Figuring out how much each of your items is worth can be a bit of a problem. The good news is that there are resources you can use to help you. Bankrate offers a valuation guide for your goods. You can fill out the worksheet to determine how much the goods are worth. However, I really liked this noncash charitable deduction worksheet> offered at the web site of Linette Landis CPA PC. Just download it, and fill it in. I like how it automatically adds everything up for you. Be honest about the condition of your goods, though.

I printed out a copy of the worksheet, showing the condition on number of the items. At the thrift store, I asked if they could sign my print out. Turns out they have their own receipt that reflects the entire value. I used the total from my worksheet to fill in the receipt, which was then signed. I filed both those items in my tax documents folder, and they will be ready when tax season rolls around again.

Donate Items You Don’t Want Anymore

If you don’t want to mess with selling old items that are still in good shape, you might want to consider donating them to charity. You won’t get direct money for them, since they don’t reduce your taxes dollar for dollar. However, the deduction will reduce your taxable income. My recent clothing donation will reduce my taxable income by almost $700 for 2012. That’s not too bad — and it can mean the difference between being in a higher tax bracket, or staying in a lower one. When added to my other itemized deductions, I think it will be a positive development for my personal finances.

The latest effort to clean out the closet has been a success, and I think that as I work to de-clutter the house in the future, I will pull up the spread sheet and fill it in as I prepare to donate. It’s a great way to help the less fortunate while at the same time reaping a financial benefit.