7 tax rules that apply to non-cash charitable donations
If you want to claim itemized deductions for non-cash charitable donations on your Form 1040, here's what we need:
Here’s a quick summary of the seven rules that apply to the most-common types of noncash charitable donations.
Rule 1: For a donation of a noncash item worth less than $250, you need a receipt from the charity — like the familiar slip you get for noncash donations to Goodwill or the Salvation Army. You need to have the receipt in hand by the time you file your return. Keep it with your tax records for the year, but don’t file it with your return.
Rule 2: To deduct a donated noncash item worth $250 to $5,000, you need a contemporaneous written acknowledgement from the charity (more detailed than a receipt) that meets IRS guidelines.
Specifically, a qualified acknowledgement generally must include the following items of information: (1) a description (but not the value) of the noncash item, (2) whether the charity provided you with any goods or services in exchange for the donation (other than intangible religious benefits), and (3) a description and good-faith estimate of the value of any goods or services provided by the charity in exchange for your donation.
An acknowledgement meets the contemporaneous requirement if you obtain it on or before the earlier of: (1) the date when you file your Form 1040 for the year you made the donation or (2) the due date (including any extension) for filing that return. If you don’t have a qualified acknowledgement in hand by the applicable magic date, your charitable deduction goes bye-bye. The good news is that legitimate charities know about the rule, and you should have no problem collecting a suitable acknowledgment. Keep it with your tax records, but don’t file it with your return.
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Rule 3: To deduct a donated noncash item worth $501 to $5,000, you need the aforementioned contemporaneous written acknowledgment plus written evidence that supports the item’s acquisition date, its fair market value, how much it cost, and so forth. You’ll need this information to fill out IRS Form 8283 (see Rule 4 below). Keep the written evidence (which may simply be notes that you’ve prepared yourself) with your tax records, but don’t file it with your return.
Rule 4: If your total noncash donations for the year exceed $500, you must fill out Form 8283 (Noncash Charitable Contributions) and include it with your return.
Rule 5: For donated clothing and household items (furniture, furnishings, linens, electronics, appliances, and the like), the general rule says you can only claim deductions for stuff that is in “good condition or better.” However, you can deduct the fair market value of an item that’s not in good condition or better if you attach a written qualified appraisal that values the item at more than $500. For example, this rule might apply to a piece of antique furniture that’s fairly valuable despite being in only “fair” condition.
Rule 6: For a noncash item worth over $5,000, you generally need what is listed in Rules 2 and 3 plus a written qualified appraisal. Specific appraisal requirements apply to certain types of donated property and to donations valued above certain amounts. However, no appraisal is required for donations of publicly traded securities.
Rule 7: Special restrictions apply to donations of vehicles, planes, and boats. The most important thing to know is that your charitable write-off will usually be limited to the amount of sales proceeds when the charity sells the vehicle, plane or boat (as opposed to any estimated fair market value for said vehicle, plane, or boat). In other words, the general rule is the IRS doesn’t care what anybody thinks a vehicle, plane, or boat is worth. The Feds only care what it actually sells for.
For more information
What you see here is only a quick and dirty summary of the rules that apply to the most common types of noncash charitable donations. For additional information, see the Form 8283 instructions and IRS Publication 526 (Charitable Contributions). Both are available at the IRS website.