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Non-Cash Charitable Contributions

Non-Cash Charitable Contributions

by | 52 Tax Tips and Weekly Financial Blog

 

 

 

Being generous counts and can offer donors great tax deductions too. Donating that old treadmill, which has been lying unused for years might reap some tax benefits. Harley and Foster know this, so every year they always keep track of what they are donating and the condition it was in when they donate items.

Most taxpayers donate far more dollar value than they realize, but they seldom keep track of it.

Generally, taxpayers will claim around $500 of non-cash donations, but if they keep track of their non-cash donations, we find families donate closer to $3000 worth. That means about $800 in tax refunds are being lost, every year! This type of deduction could save you hundreds or thousands of dollars each year, but you must document your contributions. Keeping good records is what will always win, in case of an audit.

This week we will discuss non-cash contributions. Non-cash items are furniture, clothing, home appliances, sporting goods, artwork and any item you contribute other than cash, checks, or by credit card.

Generally, you can deduct your cash contributions and the Fair Market Value (FMV) of most property you donate to a qualified charitable organization. Special rules apply to several types of donated property, including clothing or household items, cars, and boats. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or a sporting event – you can deduct only the amount that exceeds the FMV of the benefit received. FMV is generally the price you would get, had you sold the property in an open market. Usually the receipt you receive for the donation will state how much that is.

To claim a deduction for donated property valued at $250 or more, you must have a written statement or receipt from the charitable organization. It must show the amount of the donation and a description of the property given. It must also say whether the charity provided any goods or services in exchange for the gift.

If you donate property, the receipt that you are given must include a description of the items and a good faith estimate of its value. For items valued at $500 or more of total non-cash items (food, clothes, electronics, computers, household goods, furniture, etc.) you must complete Form 8283, Non-Cash Charitable Contributions.

If you claim a deduction for a contribution of non-cash property worth $5,000 or more for any one item, generally an appraisal must be obtained, and Section B of Form 8283 must be completed and filed with your return, and you must attach a copy of the written appraisal along with the tax return. If you file electronically, you will attach a PDF of the appraisal to the tax return, otherwise you can send in a written copy of the appraisal when filing a paper tax return.

It’s a best practice to take pictures of items donated when giving away Non-Cash items (clothes, furniture, household items, artwork, etc.), because this helps show the condition and the number (#) of the items donated. This way you can better prove your valuation amount used.

The Salvation Army has a website that is used to value items that are given to charitable organizations, by simply going to the website www.salvationarmyusa.org, and type in the word “valuation” in the search bar. You will see different items that are given away and the valuation that has been accepted by the IRS for charitable donation purposes, based on the condition of the item, for each item donated.

Additionally, our office has a Non-Cash charity contribution checklist that is available free to the public that can be used in preparing your tax returns. If anyone wants a copy of this, simply download it online at our website, AZMONEYGUY.COM.

Here are some points to remember:

  • Most families donate closer to $3000 worth of non-cash items, but only claim around $500 on their tax returns.
  • Be sure to get a written receipt for any cash, check or credit card contribution of $250 or more.
  • Use form 8283 if the amount of total non-cash charity is $500 or more.
  • Take pictures of items donated, to prove condition and number (#) of items given.
  • You will need a written appraisal (stating that it is for tax purposes) if the value of the item being donated is $5000 or more, for any one item.
  • Use Salvation Army website, (www.salvationarmyusa.org) to determine the value of the items donated.
  • Download a FREE copy of the Non-Cash donations checklist at our website, AZMONEYGUY.COM.

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Mr. Hockensmith has been a guest newscaster for national and local TV stations in Phoenix since 1995, broadcasting financial and tax topics to the general pubic. He has written tax and accounting articles for both national and local newspapers and professional journals. He has been a public speaker nationally and locally on tax, accounting, financial planning and economics since 1992. He was a Disaster Reservist at the Federal Emergency Management Agency, for many years after his military service. He served as a Colonel with the US Army, retiring from military service after 36 years in 2008. Early in his accounting career, he was a Accountant and Consultant with Arthur Andersen CPA’s and Ernst & Young CPA’s.

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