Score a Tax Write-Off For Donations From Your Spring Cleaning
You've emptied out boxes in your basement, cleared out your junk drawers and piled decades-old clothes to the ceiling. Instead of throwing them out or having a yard sale, turn your spring cleaning into a tax write-off for donations.
A tax write-off for donations lowers the amount of your income that's taxable. This translates to potentially lower taxes or a bigger refund. But before you head to the donation center, take these five steps to ensure you maximize your deduction.
1. Determine Your Eligible Donations
Giving items such as linens, furniture, electronics, appliances, clothing or unused sporting equipment could qualify as a tax write-off for donations. However, items must be in good condition and donations must go to an organization eligible to receive tax-deductible contributions.
The IRS has a list of eligible organizations, but you'll want to double check with your chosen organization. Most religious organizations — churches, mosques, synagogues — are eligible, too.
2. Know Your Limit
You can deduct up to 30 percent of your adjusted gross income for noncash donations to most charities; however, limits on what you're donating and to what organization vary. If you exceed the limits on contributions, you may have contributions that you can carry over into the next tax year.
3. Determine Your Donation Value
The bad news is that the value of your item is likely less than what you paid for it. But the good news is that you can still include a tax write-off at each item's fair market value. To determine this value, follow the IRS guide to Determining the Value of Donated Property.
Photos and receipts from the original purchase may help your case, and you'll want to take careful notes about each item and its condition. It's helpful to visit a secondhand clothing store or scour sites like Apartment Therapy Marketplace to see how items are priced. This will also help you price your nondonation items to sell.
4. Keep Good Records
No matter where you're donating, get in the habit of requesting a receipt from the receiving organization, a must if items are valued at more than $250. Ensure it includes the date, amounts and organization's name. You won't need to attach this documentation to your tax return, but you will need them if you're audited. If you're donating high-value items like a vehicle or a computer – anything that may be worth more than $500 – you'll want to get a formal appraisal, as noted by the IRS.
In addition to getting your donation in writing from the eligible organization, you'll need to fill out IRS Form 8283 if the amount of items you're donating adds up to more than $500.
5. Score Cash For Ineligible Donations
Low-value items, like used socks, don't qualify for a tax write-off (and you'll probably want to throw those out anyway). Contributions to an individual aren't eligible, either, according to the IRS.
Before you slap ineligible donation items on the curb with a "free" sign, try posting them on a local Craigslist page, VarageSale or the Amazon Marketplace. Even though this won't help your tax return, you may score a little extra cash that you can add to your savings or invest.
If you're ready to benefit from a tax write-off for donations, make it easier on yourself by getting organized. Keep a record each time you make a contribution, that way you don't have to scramble come tax season. In the end, it's up to you whether the time and effort is worth the payout.