How To Get A Larger Deduction For Non-Cash Contributions

It seems that everyone has “stuff” around the house that they want to get rid of. One option is to back the truck up to your front door, dump it all in the truck and head for the landfill. And for some items, that is a good alternative, maybe the only one. But some of your things may have value. It’s still in good shape and someone could make good use of it.

A garage sale may be in order. This can put some cash in your pocket, but it can be a lot of work. You’ve got to display and price your wares which takes a good bit of time and thought.  Then you have to sit out all day, answering questions, negotiating prices, and hopefully making sales. The good news is that this is probably not taxable income unless you sold an item for more than it cost. Not likely. You do need to be aware of any local restrictions or licensing of this type of activity.

The third option is to donate the goods to a tax-exempt charitable organization. You should make an itemized list of the items donated and their condition. Saying “three bags of clothing” just won’t cut it. Should the IRS audit your contributions, those would be denied. If your contributions are valued at more than $500, you must complete Form 8283, listing the date of the contribution, the name of the recipient organization, and some detail about the contribution. If it totals $500 or less, skip the 8283 and enter the value on line 17 of Schedule A.

If you just put down “three bags of clothes” you are shortchanging yourself as your donation likely exceeds the amount you value the goods and certainly exceeds any value your ethical, conservative preparer is willing to record.

If you make an unvalued list of the donated items and give that list to your preparer, you are also being shortchanged. First, it takes time to value these items, and your preparer is not going to do it for free. Second, you know more about the donated items than he does. If you record “5 women’s dresses” your preparer doesn’t know about them.  Were they inexpensive sun dresses or pricy designer gowns? Lacking information to the contrary, your preparer will be conservative, giving the items a lower value.

There are two programs that can help you value your donations and keep a good record of what you’ve donated during the year. This makes things a lot simpler for everyone at tax time. H&R Block has Deduction Pro that is now a part of its deluxe and premium tax preparation packages. Intuit has It’s Deductible, which is free online. There is even a mobile app for Apple. You simply input information about the charity, then proceed to list your donated items, and let the program value them for you. Donated something oddball that’s not on their list? Not a problem, just enter a custom item and assign a value. The IRS generally accepts the values assigned by the program.

In order for an item to be deductible, it must be in good condition or better (you can’t get a deduction for your old socks that are full of holes). In addition, there are special rules for contributions of vehicles, boats, or airplanes.  See my previous blog “The IRS Has Special Rules For Vehicle Donations” for more details on these types of contributions.

Using It’s Deductible, a simple spreadsheet, or some other system will help keep your donation records up-to-date and will simplify your document gathering at tax time. You tax preparer will be most appreciative of your organized list and you will likely get a larger deduction.  It’s a win-win-win for you, the preparer, and the charity.

Dr. John Stancil (My Bald CPA) is Professor Emeritus of Accounting and Tax at Florida Southern College in Lakeland, FL. He is a CPA, CMA, and CFM and passed all exams on the first attempt. He holds a DBA from the University of Memphis and the MBA from the University of Georgia. He has maintained a CPA practice since 1979 with an emphasis in taxation. His areas of expertise include church and clergy tax issues and the foreign earned income credit. He prepares all types of returns, individual and business.

Dr. Stancil has written for the Polk County Business Journal and has presented a number of papers at academic conferences. He wrote the Instructor’s Manual for the 13th edition of Horngren’s Cost Accounting. He is published in the Global Sustainability as a Business Imperative, Green Issues and Debates, The Encyclopedia of Business in Today’s World, The Palmetto Business Review, The CPA Journal, and in the NATP TaxPro Journal. His paper, “Building Sustainability into the Tax Code” was recognized as the outstanding accounting paper at the annual meeting of the South East InfORMS. He wrote a book entitled “Tax Issues Faced by U. S. Missionary Personnel Abroad ” that will soon be published.

He has recently launched a new endeavor, Church Tax Solutions, which presents online, on demand seminars on various church and clergy tax issues.

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3 comments on “How To Get A Larger Deduction For Non-Cash Contributions

  • I print copies of the Salvation Army thrift store value guide for my tax clients. As they come in the office I will give out copies if they don’t already have one. You can also find something similar on the goodwill site. Many of my clients will make a copys of the list and use it to check list before they take their donations to drop off. Then attach the tag they get from the non profit to the list and calculate the total of their deductions. If the item is a large ticket item I suggest they get an appraisal in case of audits. Usually this is for art work or other collectibles.

  • I’ve always been bad about itemizing my donations. I’d list it as “4 garbage bags of clothes” or “truck load of household items.” My tax preparer would subtly scold me because I wasn’t getting as much of a deduction as I could be getting. So after reading this article and then cleaning out my closet I installed the “It’s deductible” app and was surprised at how easy and quickly it was to itemize my donation. I was surprised that my 4 bags of clothes was actually valued at $734.50 and my estimated tax savings was $184. Also, I occasionally will donate items to a local charity and I rarely record that because it’ll just be a small item. However, now that I have the app I quickly record that I’ve donated something and although it is small, the donations add up to savings by the end of the year.

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