In addition to this being the time of the year when 501(c)(3) organizations come calling for charitable contributions of cash, it’s also the season for making donations of goods. Most commonly, that tends to be clothing and household items. I know from personal experience since I have three full bags of “gently worn” maternity and baby clothes waiting to be carted to my most common charity of choice for these types of items, Salvation Army.
Of course, I’m not alone. In 2003 (the last year for which IRS stats about this are currently available), taxpayers reported noncash charitable contributions of $36.9 BILLION. Almost half of those items were clothing; that’s a lot of polyester suits and bridesmaids’ dresses to be sure.
The rule is that you can generally take a deduction for the current FMV of the clothing and household items donated to charity – that’s not the purchase price but rather what the item would sell for in its current condition. So if you can’t give that lava lamp away because it’s practically worthless, you may not attempt to take a deduction for $25 when you donate it to the qualified charity of your choice. I like to use the “thrift shop value” when I make a donation; in other words, what the item would likely sell for in a maternity shop. Would you pay $50 for off-brand maternity jeans in a thrift shop? I thought not. But you might pay $10.
To substantiate your deduction on your personal return, you need to obtain a receipt from the charitable organization which has:
- the name of the charity
- the date of the gift
- the location of the charity
- a detailed description of the property donated
Clearly, “clothes” is not detailed enough. On the other hand, a list that begins “charcoal gray sleeveless wool Mimi maternity dress” is probably too much. My mother is one of the best listmakers of donated property I’ve seen. She writes “three men’s dress shirts, good condition; two pairs of work shoes, never worn” and so on. That level of description is practically perfect.
You’ll note that Mom also does something that many of us fail to do and the IRS really likes: she notes the condition. In fact, with the new law, the IRS now requires that noncash charitable contributions be considered to be in “good” condition or better, or the contribution is disallowed. The law does not define what “good used condition or better” means but use some common sense: clothing with holes or stains on them, books missing pages or dish sets that are cracked or broken are not in “good condition.” To be safe, I use this rule of thumb: would I want this? Chances are if you would be embarrassed to put those clothes on yourself or your children or put those items in your house, it likely isn’t appropriate as a donation in “good used condition.” There is an exception to the rule: if the item is valued over $500 but not in “good” condition, you may still take the deduction if you have an appraisal for the item.
So, as the season approaches, be charitable, do something good. And if you’re doing it for tax reasons, use some common sense – and don’t forget to get a receipt!
