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Giving Tuesday: Calculating the Value of Non-Cash Donations

  

The annual “Giving Tuesday” holiday is coming up on November 29, and many charitable causes will benefit from the generosity of millions of Americans who will give them money.

But it’s not all about money – many people choose to donate hard goods ranging from cars to furniture and even real estate.

“The end-of-year holidays are a time to celebrate many things in our lives,” says National Society of Accountants (NSA) Executive Vice President John Ams. “Why not make it a time to celebrate some tax savings, too?”

But if you’re donating property, what is it worth?

The Internal Revenue Service (IRS) says that property donations must be claimed at “fair market value,” which is the price a willing buyer would pay a willing seller with neither being required to make the transaction. In almost all cases this amount is far less than what you paid for the property and can vary significantly depending on the condition of the item(s) and other factors.

Household goods and clothing must be in “good used condition” or better to claim a deduction. If you take a deduction of more than $500 for an item or group of items, you must report it on Form 8283, and carry the amount to Schedule A. If you take a deduction of more than $5,000 for an item (or group of items in one donation), you must get a qualified appraisal.

The IRS suggests that taxpayers check the price that buyers of used clothing actually pay in used clothing stores, such as consignment or thrift shops, to estimate their value.

Jewelry, gems, paintings, antiques, and other objects of art should be supported by a written appraisal from a qualified source, unless the deduction is $5,000 or less. Hobby collections follow similar guidelines, and trade publications can help determine the value of these.

For cars, boats, and aircraft, the fair market value is an amount that does not exceed the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value of a similar vehicle.

Real estate is always unique and its valuation is complicated, so a detailed appraisal by a professional appraiser is necessary.

More information is available in IRS Publication 561, “Determining the Value of Donated Property.”

For taxpayers in the 25% tax bracket who itemize their deductions – which covers many middle-class Americans – deducting qualified charitable contributions from total income can save $25 in taxes for every $100 of cash or property donated.

In general, you may deduct contributions to charitable organizations in an amount of up to 50 percent of your adjusted gross income. Contributions to certain private foundations, veterans’ organizations, fraternal societies, and cemetery organizations are limited to 30 percent of adjusted gross income. For details and to check the tax-exempt status of organizations you are considering donating to, visit the IRS Exempt Organizations Select Check and deductibility status codes .



#ClientCommunication #Consumer #ScholarshipFoundation
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