Determining what your donations are worth can be taxing, but worth itYou’ve spent weeks pricing clothing and household items for your annual spring citywide rummage sale. After the daylong sale has come and gone, you pocket the earnings then load what didn’t sell in the trunk of your car and head to the nearest nonprofit charity thrift shop to drop them off.
By: By Shelly Birkelo/The Janesville Gazette, Superior Telegram
You’ve spent weeks pricing clothing and household items for your annual spring citywide rummage sale.
After the daylong sale has come and gone, you pocket the earnings then load what didn’t sell in the trunk of your car and head to the nearest nonprofit charity thrift shop to drop them off.
But before driving away make sure you get a signed, dated receipt for your donations so you can claim them on your 2009 tax return.
“Don’t guess anymore what your items are worth. There’s got to be more value of what people are really donating than they are taking advantage of and what Uncle Sam will pay,” said Bill Lewis, author of “Money For Your Used Clothing.”
A board-certified public accountant and financial planner from Lincoln, Neb., Lewis integrates tax strategies with investment strategies for his business clients and wrote his first “Money for Used Clothing” book in 1990 out of need.
Lewis talked with Internal Revenue Service representatives in Washington, D.C., before researching and surveying thrift and consignment shops nationwide to determine the market value of items people were donating to charity. It took months, he said.
Donors determine value
The law does not allow charities to set values of donations. Donors are supposed to determine values, but most have no idea what they are worth, Lewis said.
Donors who want help determining values can check out Lewis’ list of more than 700 items of clothing and household goods commonly donated to charity.
“The values ... conform to new IRS requirements for valuing donated items,’’ Lewis said.
Following the guidelines are important, Lewis said, because if people overvalue their donations, they are at risk of being audited and paying penalties plus interest.
On the flip side, those who underestimate their donations pay more taxes than they should, he said.
In instances where the IRS challenged those who used Lewis’ booklet to value their donations, “we’ve never lost a challenge,” he said.
What’s it worth?
Those who don’t want to or can’t afford to buy Lewis’ book — the 2009 edition is in production and will be available by the end of May have other options for determining values of their donations.
Salvation Army Thrift Stores that use sales proceeds to fund adult rehabilitation programs provide a free valuation guide at www.salvationarmyusa.org. Click on Ways to Give then Donation Receipts/Valuation Guide. Here you’ll find a list of values for appliances, automobiles, children’s clothing, furniture, household goods, men’s clothing, miscellaneous and women’s clothing.
“It will assist you in determining the tax-deductible value of any items you are donating to the Salvation Army. You will see that the table includes low and high estimates of value. Please choose a value within this range that is in keeping with your item’s relative age and quality. If you have questions, your local Salvation Army Thrift Store and donation center will be able to assist you,’’ according to the Web site.
A receipt for items may be obtained when dropping off a donation at a local Salvation Army Thrift Store where the clerk or receptionist will provide a receipt. If you have donations picked up, the truck driver will provide you a receipt.
Federal law permits Goodwill donors to claim tax deductions for their donated clothing, accessories, household goods and miscellaneous items. To help guide donors, Goodwill Industries International has compiled a free suggested list with price ranges for items commonly sold in Goodwill Stores.
To access the list visit www.goodwill.org, click on donate goods, then tax deductions and valuation guide or visit amazinggoodwill.com, click on donating, then donor guidelines and value guide.
Keep good records
Indicate the quantity and condition multiplied by market value to calculate your total donation amount.
Complete Form 8283 when the value of your donated items exceeds $500. The form requires you to give an approximate purchase price for items being donated plus the approximate dates you bought them. If you do not know the year, write the word “various” on the appropriate line of this form. To print a copy of form 8283 or any other IRS form, you can visit the “Money for Your Used Clothing” Web site at www.mfyuc.com to get linked to the IRS site to print forms.
Record how you obtained clothes or household goods then estimate the cost of your donated items.
Record the name and address of the organizations receiving your donations, the donation date, donation amount, a brief description of the donation and how donation was acquired.
Arrange your items on the floor, sofa or bed and take a quick snapshot or video. That will substantiate your contribution if questions ever arise. Keep the visual record with your tax files.
Obtain a signed, dated receipt for your donations. Your donations must be made by Dec. 31, 2009, to be claimed on your 2009 tax return.
— Copyright (c) 2009
The Janesville Gazette, Wis.
Distributed by McClatchy- Tribune Information Services.