How to get rid of old stuff and reduce your taxes

Aceitunas Balaguer
Aceitunas Balaguer
by Jorge Franganillo, on Flickr

I’m about to save you hundreds of dollars on your next tax return.

The IRS permits you to deduct the fair market value of any property that you donate.  This can include clothing and household items that are in good condition, such as furniture, electronics, appliances, and linens.  Here the requirements:

You must give to a qualified organization.  This is a church, synagogue or other non-for-profit organization certified by the IRS.

Fair market value of household items is based on the value such items would sell for in a second-hand shop.  To help you value your donation, many charities will provide you with a price list; here is the Salvation Army’s.  And here are IRS guidelines.

If you don’t itemize deductions on Schedule A, then individual contributions will usually not reduce your taxes.

If you are going to deduct more than $500 for a car, boat or airplane, you may not deduct more than the organization’s proceeds from the sale of the vehicle.  For example, suppose I donate an old car which I estimate to be worth $1,000 based on Kelley Blue Book.  The organization sells the car for $900. My maximum deduction is $900.

I donated my car to Kars-4-Kids.  In spite of the irritating radio jingle, this organization does great work in our community.  Kars-4-Kids has published an “Accountant’s Guide to Car Donations.”  You can download it for free here.

Tax rules are always more complicated than they seem.  I wrote this post to familiarize you with the rules.  Before you deduct any contributions, read through the IRS requirements here.

Hurry up.  Donations given before December 31 can be deducted on this year’s tax return.  Donations given after December 31 can’t be deducted until next year’s tax return.

About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

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