The Attic Dwellers - Tax Deductible Non-cash Charitable Donations
Guest Blogger: Holli Dawson is a freelance writer in the fields of personal finance and real estate, and writes on behalf of a number of different publications and sites (most recently on behalf of a major moving services provider). She lives in Ontario with her two sons and four dogs, which is about as chaotic as you can imagine.
The coming of a new school year tends to bring the "cleaning out of the closets." This blog post talks about those treasures that you find in the attic while looking for the box of winter clothing...
There can be a great deal of confusion when it comes to the level of tax deductions allowed for charitable contributions that are not made directly in the form or cash or credit. This has the potential to be rather problematic, as many donors may find themselves coming up somewhat short at the end of the tax year, or perhaps even limiting their donations so as to avoid complications and the additional problems inaccurate claims may cause.
The simple truth of the matter is that it is in fact possible and not even remotely difficult to put a monetary value on non-cash charitable donations so as to include all within standard tax deductions. Regardless of whether the items in question are the ever-popular unused items of clothing, household furnishing or perhaps items of much higher value, all such items can be included in the claim for a tax deduction on a tax return, assuming the valuation and form filling has been done correctly. Of course, there are plenty of items that will not be allowed for inclusion, but all donations will still help others in need and are therefore vigorously encouraged.
Those looking to add non-cash donation to their tax deductions should do the following:
- Seek out an independent appraiser who is qualified in assessing the non-cash items you are interested in donating. This is required by most recipient organizations like museums.
- Examine the condition of all items to be donated and realistically appraise them from top to bottom. While any household items and items of clothing that are broken, damaged, stained or incomplete will likely be accepted with open arms from the charity, they cannot be included as having a deductible value.
- Determine the value of the complete and undamaged items to be donated as realistically and honestly as possible. This should never be done simply be personal opinion, but by comparing each item to a similar example made available via a charity shop, auction or perhaps an independent appraisal.
- If available, locate any receipts and invoices for brand new and unused items, as these can be used as verifications for the estimates if other elements such as time passed and so on are taken into account.
- Should the item in question be a car or vehicle of any kind, ensure that the appraisal is carried out by a professionally registered and approved body, otherwise the estimate will not be accepted under any circumstances.
- Any items in less than brand new condition with an estimated value of over $500 should be removed from the tax return and appraised by an approved service. The results provided from the appraisal service should then be provided with the form.
- Factor in appreciation, as if the item donated is likely to increase in value considerably over time then further deductions may be allowed.
- IRS Form 8283 must be completed in full with all donations included. If any donated item is worth more than $5000, then it will be necessary for the recipient charity to provide their signature as backing – below $5000 this is not required.
- For Canadian donors – some objects with significant Canadian Heritage will need to be reviewed by the Canadian Cultural Property Board prior to donation to an approved organization.
Aside from these points, it is important to remember that an appraisal from the charity will never be accepted, though an acknowledgement receipt is always welcome. Furthermore, mistakes in the completion of the form should be avoided at all costs in order to forego the possibility of an audit.