Too often taxpayers lose out on the opportunity to reduce their income by the value of their donations. Here are some tips to make sure this does not happen to you.
One often over-looked way to reduce your tax obligation is to donate gently used items to a favorite charity. Too often this is done without the necessary forethought to ensure you can deduct the value of these donations on your tax return. Here are some tips to ensure you can receive this tax benefit.
- Good or Better Condition. Remember only items donated that are in good or better condition can be used as a charitable contribution on your tax return.
- Document your donation. Fill out a donation sheet each time you donate. The sheet should include the name of the charitable organization, address, date, and types of items donated. It should also include a detailed list of the items donated, their initial value and the donated value. Note the value you are assigning to each item donated.
- Take a Photo. Use this photo as a visual documentation of what you donated.
- Get an acknowledgement and receipt. Even if the donation is small, always ask for an acknowledgement of your donation. Even churches should be ready and willing to do this for you.
- Establish reasonable value. Do not overstate the value of the items you donate. Use places like e-bay, Amazon, the Salvation Army and used book/consignment stores to establish the used values of your items.
- Donate entire ownership. The IRS does not like donation of part ownership of items. It is always best to make donations with no strings attached.
- Track your mileage too. Remember even your miles driven to and from the charitable location are deductible too.
- Have your warning antenna go up. The IRS has special rules for charitable donations. While they can be complex, here are some red flag items that should warrant consultation prior to donating the following:
- Any stocks and investments owned for one year or longer
- Any items valued over $250 or $500 or $5,000. Each of these levels can introduce new documentation requirements and a potential requirement for appraisals.
- Cars, boats, RVs, and other major assets
- Giving items to unfamiliar charitable organizations