Taxpayer asks:
Hi Tax Girl!
I got rid of the husband and now I would love to get rid of the engagement ring. I have thought about donating it to a non-profit animal rescue group for them to auction at one of their charity events. What kind of deduction will I be able to claim and is there any kind of red tape I will have to go through to be able to do this?
Thanks!
Taxgirl says:
Well, good for you!
A couple of things…
The first is that you should check with the non-profit first to make sure that they can use your ring in their auction. Generally, to claim the full charitable deduction, the charitable organization must be able to use (or quickly liquidate) the item. So, you can’t, for example, deduct stock in a closely held corp that’s impossible to redeem or a year’s supplies of steaks to PETA. So, step one: make sure that the charity can use it and will acknowledge the donation.
Step two: get an appraisal. Check out my prior post which references appraisals and fees. Keep in mind that the appraisal should describe the style of the jewelry, the cut and setting of the gem, and whether it’s considerable fashionable. If it’s not in fashion, the appraisal should reference any change in value if the ring is recut or reset.
If the ring is valued at over $5,000, special rules apply (check out Section B of form 8283 which will download as a pdf, if that’s the case).
That said, unlike the wedding dress mentioned in my prior post, jewelry is not considered a “household item.” It’s actually considered a capital gain item and the rules can be a little complicated here since the item is to be sold by the charity. Depending on the length of time you’ve held the ring and its value, there may be some restrictions which apply. For example, which respect to property held for less than one year, the IRS only allows you to claim the purchase price. So, be careful.
The bottom line is that this one can be a little bit tricky depending upon the value of the ring, the appreciation (if any) from the purchase price and the length of time you’ve held the ring. I absolutely recommend checking with a tax pro for the specifics (remember that the cost of the tax pro’s services is also deductible).
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook at http://www.facebook.com/taxgirl
Taxpayer asks:
Hi Taxgirl,
Like many women this year, I got married and now I would like to donate my dress to charity. What do I need to do for tax purposes? I paid 1000 for it new and only wore it once. It is in good condition. Do I need it appraised? I still have the receipts. If I send it to a charity, can I deduct the mailing cost? And can I deduct the cost of drycleaning it before I send it to the charity? Also, the charity resells the dresses at an auction/fundraiser and charges a $40 “processing” fee to help cover their expenses. Is this deductible?
Thanks for answering this question, I bet a lot of brides will appreciate your answer!
The new Mrs’s
Taxgirl says:
What a great idea!
Generally, you can deduct the fair market value of property donated to a qualified charitable organization. When it comes to clothing, the clothing must be in good used condition or better – it sounds like your dress is nearly perfect.
Usually, the fair market value of used clothing is considerably less than the original price. Usually, you’ll opt for the “thrift store” value of the clothing – what you’d pay for the same item in a thrift store or on consignment.
In this case, however, you will need a written acknowledgment from the charity and, quite possibly, an appraisal. I’m not sure what the value of the dress would be, but assuming that it’s over $500, you’ll want a written determination of the value of the dress (an appraisal will do).
You can’t deduct the cost of dry cleaning the dress but I will say that I’d do that prior to an appraisal. The better an item looks, the higher it’s likely going to be valued. I’ve found this to be true with respect to a lot of artwork. Once cleaned or repaired, the value went up substantially.
Unfortunately, the fees for the appraisal are not deductible as a charitable contribution. But you can claim them as a miscellaneous itemized deduction on Schedule A; they will be subject to the 2% rule.
I think there *might* be an argument on the postage front as an out-of-pocket expense but, personally, it’s not an argument that I’d love to make considering the relatively small benefit. Out-of-pocket expenses as charitable deductions are generally associated with volunteer time (when you can’t take a deduction for the time) or when you incur fees for the convenience of the charitable organization (i.e. you buy postage on your own dime for mailers). In this instance, technically the postage is for your convenience. I’d ask your tax pro for their opinion but if it were me, I’d be inclined to say no to this one.
With respect to the “processing fee”, I think it depends on the description and exact purpose of the fee. I’d check with the charity directly for that one.
I think it’s wonderful that you’re going to do something charitable with your dress rather than stuff it into a closet. Good luck!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook at http://www.facebook.com/taxgirl
It’s October, which means that it’s Breast Cancer Awareness month. Last year, on the blog, I promised to donate a dollar for every unique comment on my cancer post.
This year, I’m doing it again.
I saw, on twitter, and elsewhere criticisms of similar campaigns, asking why it’s necessary to ask for comments: why not just donate?
To be clear, I do donate. I give my dollars and my time to the work of various cancer and breast cancer organizations. In fact, I’m running again in May, as Team Captain, for Komen’s Race for the Cure in honor of my grandmother (you can make a tax deductible contribution here).
This is a cause that I am passionate about. And I do *get* the criticisms about making it a spectacle. But here’s why I do it: I want to make a spectacle. I want to cause a commotion. I want you to think about cancer.
Last year, I was particularly struck by this an article written by Karen Heller of the Inquirer, critical of the whole Pink for October campaign. I wrote her a letter in response, which I’m posting here (edited for brevity):
I read your column each week and often agree with your observations about children, commercialism and culture. However, this week, I feel compelled to write to you because I think you missed the mark in your article on breast cancer.
My grandmother died of breast cancer. You’re right in saying that it is not a pretty disease. My grandmother’s cancer spread to her lungs. I watched her die. Literally. My mother and I were with my grandmother in her house when she took her last breath. It was a horrible, terrible way to die.
…
You are not the first person that I have heard criticize the "pinking" of October. I’ve heard it a lot, and I respectfully disagree. Is it commercial? Of course it is. This is, after all, America, and if a capitalist can find a way to make a buck no matter what the occasion, he or she will. It has become "cool" to wear Lance Armstrong Foundation bracelets and AIDS ribbons. At the end of the day, does that take away from the good that it does? I don’t think so. …I don’t think that you can be too aware. And, despite your statements in your column, I do think it promotes awareness.
Every time that I see my pink ribbon, I think about my grandmother… And then I think about the fact that more than 200,000 women will be diagnosed with breast cancer this year alone. They are grandmothers, mothers, sisters, daughters, family friends… As a woman and as a mother of three children, how can I not promote awareness of a detectable, and often curable, disease that affects women in such huge numbers?
So, at the end of the day, while I agree with you that there’s a whole lot of pink going on, I don’t think that’s a bad thing. Awareness might mean that one more woman gets a mammogram, or asks the doctor what that lump is. And it might save a life. Isn’t that worth a little pink now and again?
With that in mind, here’s my little bit of pink on the blog today. Like last year, for October, in honor of my grandmother, I’m making a donation to Susan G. Komen For the Cure. I’ll donate $1 for every unique comment (meaning, not spam) on this post. You can just say hi, ask me a tax question, chat about tax policy or leave the name of someone close to you that was diagnosed with breast cancer – heck, you can even tell me how much you love the Phillies! (Actually, after the game last night, you can especially tell me how much you love the Phillies!)
Technorati Tags:
breast cancer, Komen
Stephanie Dean and Stefani Hovarter (yeah, I know!) have filed a lawsuit against Feed The Children for wrongful dismissal. Dean and Hovarter claim that they were fired after pointing out to the charity that more than $1 million was owed to the State of Oklahoma.
The tax allegedly owed is in the form of use tax. Use taxes are roughly the equivalent of sales tax and are owed when sales tax is not paid. Dean and Hovarter noticed the discrepancy for the time period January 1, 2002 to June 30, 2009, and alerted officials at the charity. They also advised that there may be similar amounts due in other states. The pair then alleged that Christy Tharp, CFO for Feed the Children, was aware of the problem and chose not to report it, instead hoping that the statute of limitations would run.
On September 17, the accountants notified the Tax Commission of the discrepancy. After the disclosures, Dean and Hovarter were fired on September 29. They filed suit 2 weeks later, seeking lost wages, emotional distress and punitive damages.
Feed The Children has not offered any comment.
My two cents on the suit? Unless there’s a written contract that says otherwise (and I don’t know that there isn’t), Dean and Hovarter may be out of luck. In the US, for the most part, employment laws are favorable to employers. Most employees are considered “at will” which means I can fire my employees for wearing yellow to work if I wanted. However, there’s one big exception that might apply: if their actions fall under one of the whistleblower statutes, there might be some additional protection. I have not seen the actual text of the lawsuit, so I’m not sure if they’re playing that card or not… I’ll let you know when I find out.
