Many of us have pulled out clothes and other items to donate
to our favorite charity on a yearly basis. The question
is, are you getting a fair deduction for your donated goods
or are you short-changing yourself? Many taxpayers donate
bags of items and take the standard $50 deduction per bag,
but actually qualify for three to five times as much. If
the donated items had high dollar value to begin with,
you should take this into consideration. You should be
getting what is called "Fair Market Value" for
your donations. Now the questions are, what is fair market
value? And how do I calculate it?
According to the Internal Revenue
Service; "Fair market
value (FMV) is the price that property would sell for on
the open market. It is the price that would be agreed on
between a willing buyer and a willing seller, with neither
being required to act, and both having reasonable knowledge
of the relevant facts. If you put a restriction on the use
of property you donate, the FMV must reflect that restriction."
Also, the Internal Revenue Service Gives examples and factors
to support required valuations;
One Example Is: If you give used clothing to the Salvation
Army, the FMV would be the price that typical buyers actually
pay for clothing of this age, condition, style, and use.
Usually, such items are worth far less than what you paid
for them.
Factors: In making and supporting the valuation of property,
all factors affecting values are relevant and must be considered.
These include:
- The cost or selling price of the item,
- Sales of comparable properties,
- Replacement cost, and
- Opinions of experts.
- After determining your donations fair market value, you
will need evidence of fair market value if you are audited
in the future. Take the following steps to prove your
fair market value in case of a future audit:
- Take a picture of the items you donate,
- Keep the deductible receipt you receive from the organizations
you donate to,
- Store all pictures, receipts from deductible organizations,
and original product receipts(if you have them), along
with any other information you may have.
- Remember to use IRS guidelines
IRS publications to read on this subject, and forms to use
are:
Publications:
561 Determining the Value of Donated Property[click
here]
526 Charitable Contributions[click
here]
535 Business Expenses[click
here]
IRS Forms:
8282 Donee Information Return[www.irs.gov]
8283 Non-Cash Charitable contributions[www.irs.gov]
Lois Center-Shabazz is the founder of MsFinancialSavvy.com and author of the
3-time award-winning personal finance book, Let's Get Financial Savvy! ISBN
#0971979502.
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