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Making the Most of Your Noncash Charitable Donations

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I posted previously about garage sales and how in many instances you do better simply donating the items to a worthy charity and taking the tax deduction. However, to make the most of your donation you have to be careful and keep good records. Here are a few things to look out for:

  1. Do you itemize your taxes? If not, than the donation provides you no financial benefit. If you aren’t sure if you will itemize or not, it would be very beneficial to do some quick planning and figure out how much you expect to pay in state and local taxes, property taxes, mortgage interest, and how much you plan on donating in cash to the charities of your choice during the year. A lot of people end up right around the standard deduction anyway, and if so it makes sense to try and lump those deductible items into one year and take the standard deduction the next. You may not be able to time mortgage interest payments, but you likely have some control over when you pay your property taxes and make other charitable donations.
  2. Document, document, document! Make an itemized list of everything you donate. Ideally your list should include what you donated, the condition of the donated items, and how many you donated. You may also want to consider taking a picture of your donated items to support your listing and…
  3. Get a receipt! Basically, any donation of goods over $250 must be supported by a receipt from the receiving charity. Just be sure to take your items to an attended drop-off site (don’t just put the stuff in the bin in the parking lot) and ask for a receipt. The attendant will likely give you a blank receipt and ask you to fill in your name and address and a description of the items you are donating. You don’t have to list everything – just keep it high level (i.e., two bags of men’s clothing). The detail will be on the itemized list you made in step two.
  4. Value your stuff fairly. When most people try to guess the value of their items, they usually grossly undervalue the goods. Remember that you are entitled to a write-off of the fair market value of the item. Just because your t-shirt would only get 50 cents at a garage sale doesn’t mean that is its true value. Programs such as H&R Block DeductionPro are great for providing fair valuations and organizing non-cash donations. If you can’t find the item you donated listed in your program, then you may want to go to eBay to try and determine a fair value for the item. It would likely be worthwhile to print out the source you are using for your valuation.
  5. Keep it small. For noncash donations of a single item or multiple items totaling $500 or more to a single charity on a single day, you must provide information on how you acquired the property donated, your basis (cost) in the property, and when you acquired it. However, for donations under $500 this information is not required. Keeping it small also allows you to work on cleaning out a room or closet at a time and getting unwanted goods out of your home quickly.
  6. Track your mileage, too. Mileage incurred for the direct benefit of a charity, including to bring a donation to the charity is tax deductible, although not at the standard business mileage rate. The charitable mileage deduction is about 14 cents a mile. Not a huge amount, but every little bit helps.
  7. Start a 2007 tax folder now, and put your documentation in it. What good is your receipt and listing if you can’t find it come tax time? Go ahead and start a folder to keep tax-related items (charitable donations, health care expenses, etc.) so you have a head start when it comes time to file next year.

Please note I am talking about donations of small household items only. There are special rules around donations of more valuable property, collectibles, real estate, automobiles, cash, and financial instruments, to name a few. Be sure to do your homework if any of these apply to you, and call a reputable CPA or tax attorney for guidance if needed.

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June 25, 2007 - Posted by | Taxes

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