Americans love to give: They deduct over $200 billion of charitable contributions a year on their tax returns, according to IRS data. Most of those contributions are in cash, but tax pros say you don’t have to give dollars to get a fat deduction. Donating household goods, food, clothing and other items can put a dent in your tax bill, too.
Here are four of their tips for minimizing your tax bill while you’re maximizing your generosity.
1. Know what things are worth
The deductible values of everyday items can add up fast, especially if you’re doing a closet clean-out, a garage gutting, a pantry purge or are moving.
“Basically what the law says is that you’re allowed to deduct the value that the item would go for if exchanged between a willing buyer and a willing seller. A lot of times you’ll hear people refer to thrift shop value: If I give a coat to the local thrift shop, what I should be deducting is what you’re going to go in and pay for that coat when you walk in five minutes later,” says Phyllis Jo Kubey, a certified financial planner and a director for the New York State Society of Enrolled Agents.
One way to find this information is to consult your tax software — it may have a built-in tool that looks up the value of certain items. Another is to consult charity websites. Many publish estimated values of commonly donated items, Kubey says.
|Lamp||$4 - $12|
|VCR or DVD player||$8 - $15|
|Desk||$30 - $60|
|Hardcover book||$1 - $3|
|Prom dress||$12 - $22|
|Dress shoes||$12 - $21|
|Frying pan||$7 - $10|
|Portable basketball hoop||$68 - $98|
|Halloween costume||$13 - $26|
|Men's T-shirt||$8 - $12|
2. Get a receipt
You’ll need to keep an itemized list of everything you donate, and you’ll need proof of the donation, says Suzan Ali, an enrolled agent in Stockton, California. It may sound easy enough, but this is where many taxpayers get in trouble, she says.
“They will just throw everything into a bag … sometimes they will just donate it without accepting the receipt,” she says.
The receipt, Kubey notes, should show the name and address of the charity, the date of the contribution and a description of the property. If you left less than $250 worth of goods at one of those unattended drop sites, the IRS says it’s more lenient about getting a receipt, but you’ll still need a record of what you donated and where it went. Taking a photo of the donated items doesn’t hurt, either, she adds.
3. Give to the right people
Only donations to qualified, IRS-recognized organizations are tax-deductible (see the IRS’ list here). This means giving an old refrigerator to, say, your sister-in-law doesn’t get you a deduction, Ali adds.
“At the same time, if you have the refrigerator and you take it to a church, you cannot direct the church to give the refrigerator to your sister-in-law. Because that is providing direction. That is still holding on to the item,” she says.
4. Be ready to get an appraisal for big gifts
It may be worth getting with a tax pro before making big donations because there are special rules for giving away things such as cars, art or investments, Ali says. There are even special rules for donating taxidermy, according to the IRS. Generally speaking, the bigger your donations, the more record-keeping the IRS expects.
Donations totaling a combined $5,000 or more for the year may require written appraisals, Ali notes. That means unloading a bag of old T-shirts probably won’t require an appraisal, for example, but 30 bags might.
The appraisal has to be recent, too, Kubey warns — it can’t happen more than 60 days before making the donation.
“The really sad thing is if someone comes in and they say, ‘Oh, last February I inherited this art collection and it was worth $10,000, and I donated it to an art museum, or my local hospital or whatever.’ It’s too late by the time I hear about it to tell them they needed to do X, Y and Z in terms of getting that appraisal,” she says. “That’s a real tough thing.”
Tina Orem is a staff writer at NerdWallet, a personal finance website. Email: [email protected].