Non-Cash Donations

Donations don’t always have to be in cash. One can also deduct the “fair market value” (FMV) of donated items like used clothing, furniture, and appliances (FMV is the price goods are likely to sell for on the open market).

Condition of Contributed Items:

The condition of the contributed item is important, because except as noted below, tax law does not permit a charitable contribution for clothing or household items unless the contributed items are in “good used condition” or “better.”

Tax law also does not allow a deduction for items with minimal monetary value, such as used socks or undergarments. There is a provision that permits a deduction for clothing and household goods that are not in good used condition or better. Under this provision, a deduction can be taken if (1) the amount claimed as a deduction is greater than $500, and (2) the taxpayer includes with the taxpayer’s return a qualified appraisal with respect to the property.

Household items include furniture, furnishings, electronics, appliances, linens, and other similar items. Food, paintings, antiques, and other objects of art, jewelry and gems, and collections are excluded from the definition of household items for this purpose.

Large Donations:

There are other rules that apply to certain types of non-cash contributions including limitations, appraisal requirements, deduction recapture, etc. Therefore, when contemplating an unusual or substantial non-cash contribution, it is appropriate to consult with this office.

Valuing Your Donation:

Perhaps the most difficult part of making non-cash donations is determining the value of the goods being given away. The decision about value is left to you and, unfortunately, there aren’t any cast-in-concrete formulas to give you the “right” answer. Here are a few general guidelines that may help:

• Consider the condition of each item being given away. Compare the style of your donation with current styles. Categorize each item being given by its condition (e.g., good, excellent, new, etc.)

• Do a little detective work to find out what the item you are donating would sell for in the current market. A visit to the local thrift shop, a quick glance through newspaper classified ads, or a stop at a neighborhood garage sale should provide you with a pretty good idea of the prices of goods like yours.

• If your donation includes equipment or machinery, consult with publications of commercial firms or trade organizations to find out your property’s value. Many of these organizations regularly publish information about going sales prices for cars, boats, airplanes, etc. Caution: When donating used vehicles to charity, special rules apply. See the paragraph on "Donating Used Vehicles to Charity.”
 
Your research will probably show that most used merchandise has a value that is considerably less than your property’s original cost! However, some items you give away may have actually gone up in value (e.g., antiques, jewelry, or artwork). To determine the value of these, hire a qualified appraiser. Regardless of whether the value of a donated item has gone up or down, if its current value is more than $5,000, a professional appraisal is mandatory (exception: most publicly-traded securities do not require an appraisal). Check with your tax advisor about the details that must be included in the appraisal and the IRS-required form.

Donating Used Vehicles to Charity:

Congress has imposed some tough new rules that substantially limit the deduction for a car donation. If the deduction exceeds $500, the deduction will generally be limited to the gross proceeds from the charity’s sale of the vehicle. In addition, a written acknowledgement from the charity is required and must contain the name of the donor, donor’s tax ID number and the vehicle identification number (or similar number) of the vehicle. The IRS provides form 1098-C for this purpose. There is an exception to these rules for donated vehicles that the charity retains for its own use “to substantially further the organization's regularly conducted activities.” Please call this office for more information.

Record of Non-Cash Donations:

Keep a list of the donated items and include a description of the property, its cost and FMV, how you determined the FMV, and when and how it was acquired. If the property has appreciated in value, be sure to get an appraiser’s report (since special rules apply to appreciated property, check with your tax advisor before you make your contribution). Request a receipt at the time of the donation and make sure it includes the date and the organization's name and address. If the value of donated items is $250 or more, in addition to the information noted above, a written acknowledgment from the organization must state whether the charity provided any goods or services in return for the gift, and if so, a good faith estimate of the value of the goods and services provided. You must have this written acknowledgment by the date you file your return or the extended due date of the return, whichever date is earlier.

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