If you are like many Americans, you like to try and itemize deductions on your federal tax return. If you do not use the standard deductions, you may be entitled to claim a deduction for charitable donations you made throughout the year. My first tip is to make sure you take a picture of the items you donated as well as keep a list of the items donated. The more organized you can be about your donations, the better. The organization can include a list of items, the organization donated to, date of donation, and amount you will be claiming. Remember that all donations over $500 dollars require a receipt so make sure you ask for it ON THE DAY OF YOUR DONATION!
How much can you deduct?
The IRS says that a taxpayer can deduct the fair market value (FMV) of the items they donated. The FMV is most likely not the amount you originally paid when you purchased the donated item. Rather, the FMV is more closely related to the value of the item at the time it was donated. Take into consideration the wear and tear of the item, age, quality, and how much the donation is worth to that particular agency when factoring its FMV. Donations are usually in the form of household goods, furniture, clothing, appliances, etc. You may need to consult with a tax professional to help you arrive at a proper valuation. Some sources estimate the FMV to be around 30% of the items original value.
What records do I need to keep?
In order to back up what you have put on the tax return(s) it is important to keep good records. To help substantiate your donations and their valuations your record keeping is key. S.H. Block Tax Services, Inc. suggests that clients keep detailed lists of their donations and hold onto those records for five years or as long as they may be required.
Please keep a list of the following in your records
- Eligible organization name(s)
- Date of donation
- Description of items donated
- Your FMV estimate
- Date and cost of original purchase of donated item
- Any other pertinent information relating to the donation
As always, my advice is if you are unsure about this or any other tax deductions or credits, it is in your best interest to consult with a reputable tax professional.