Charitable Giving and Your Tax Return

We all enjoy the good feeling we get when we know that we’re helping others with our charitable giving. And we don’t necessarily think of keeping track of donations of time, money, clothing, and other goods since that is not our primary motivation. But every time we put a few dollars in a collection plate, or a canister for a cause we believe in, and every time we drop off bags and boxes of canned goods, clothing or household items at an organization, we should remember to get a receipt for the value. Why? One good reason:  over the tax year, these donations can amount to more than you think, and if you itemize, you may be able to take a deduction on your tax return for them.

But do you know exactly how much you can deduct for your charitable contributions of material goods? How much is all the “stuff” you’ve donated worth? You can’t deduct the price you paid for the goods. But the value is what you can deduct.

So, first, you need to get in the habit of keeping track of giving. With regard to cash donations, just keep a little notebook or sheet of paper tucked into your wallet or checkbook and jot down the amounts you donate throughout the year. If you tithe – give 10% of your income – to your place of worship, keep track of in your checking account and request an annual gift letter showing the total amount donated for the year.

When making material donations, you have to make sure donated items are in decent shape (no holes, rips, bad stains, etc.) Be sure to get that receipt from the organization to which you donated the goods. But how do you determine the Fair Market Value of the goods donated, to know what you can deduct? 

If you donate a high dollar item, get an assessment from a professional source. For instance, if you have donated an old car, use the Kelly Blue Book value.

Here are a few more ways to best figure out the Fair Market Value of goods donated:

1. Visit a local thrift shop and try to determine the value from their pricing. Best advice:  choose the lowest price.
2. Visit the Goodwill or Salvation Army valuation websites. Both of these sites offer easy to use tools and lists to determine the value of donated items (clothing and household appliances).
3. Visit the IRS website. IRS Publication 561, Determining the Value of Donated Property, lays out in great detail how to best value your donated property.

And, remember, a tax professional at your local PRO-TAX office can help you with all your charitable giving deduction questions.

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