For federal income tax purposes, if you claim a charitable deduction for an item or group of similar items of donated property worth more than $5,000, you must get a qualified appraisal signed and dated by a qualified appraiser.
So what does that mean? A qualified appraisal is an appraisal document that:
- Is made, signed, and dated by a qualified appraiser;
- Meets the relevant requirements of the Regs at §1.170A-17(a);
- Is dated no earlier than 60 days before the date of the contribution and no later than the date of the contribution; and
- Does not involve a prohibited appraisal fee (typically, that means that no part of the fee arrangement can be based on a percentage of the appraised value of the property).
A qualified appraiser is an individual with verifiable education and experience valuing the type of property for which the appraisal is performed. Generally, that means that the appraiser has earned an appraisal designation from a generally recognized professional appraiser organization or has met certain minimum education requirements and two or more years of experience.
You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed.
I know that wording sounds odd (“receive the qualified appraisal” rather than submit), but that’s because you generally do not need to attach the qualified appraisal to your tax return (some exceptions apply). You should, however, keep a copy for as long as the statute of limitations is applicable.
The appraisal must include:
- A description of the property in sufficient detail for a person who is not generally familiar with the type of property to determine that the property appraised is the property that was (or will be) contributed;
- The physical condition of any tangible property;
- The date (or expected date) of contribution;
- The terms of any agreement or understanding entered into (or expected to be entered into) by or on behalf of the donor and donee that relates to the use, sale, or other disposition of the donated property;
- The name, address, and taxpayer identification number of the qualified appraiser (if the appraiser is a partner, an employee, or an independent contractor engaged by a person other than the donor, the name, address, and taxpayer identification number of the partnership or the person who employs or engages the appraiser);
- The appraiser’s qualifications, including the appraiser’s background, experience, education, and any membership in professional appraisal associations;
- A statement that the appraisal was prepared for income tax purposes;
- The date (or dates) on which the property was valued;
- The appraised fair market value (FMV) on the date (or expected date) of contribution;
- The method of valuation used to determine FMV; and
- The specific basis for the valuation, such as any specific comparable sales transaction.
Some kinds of appraisals – like art appraisals – may require additional detail.
See Pub 561 for more information on appraisals and charitable deductions.
You can find the rest of the series here:
- A is for ATIN
- B is for BEAT Regs
- C is for Cryptocurrency Reporting
- D is for De Minimis
- E is for Extended Due Dates
- F is for FTE
- G is for GILTI
- H is for Head of Household
- I is for Inflation
- J is for Jeopardy Assessment
- K is for Kiddie Tax
- L is for Legal Entity
- M is for Mark-to-Market Taxation
- N is for Nexus
- O is for Ordinary and Necessary
- P is for Personal Exemption
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