Get Paid to Donate Your Stuff
If you itemize your tax return, you probably know that you are allowed to deduct the fair market value of clothing and household items you donate to charity. But what's the fair market value of, say, a pair of shoes or a lamp? More than you might think.
The law does not allow the charity to determine the value of an item you donate. The charitable organization gives you a receipt saying that you made the donation. You, the donor, must assign that "fair market value." And that's the problem.
If you overstate the value, you risk an audit, penalties and interest. If you underestimate you'll pay more taxes than you should.
Some years ago, my husband and I donated our antique pump organ to a church where it will be used in services and enjoyed by many. It's more than a hundred years old, so looking up the new price and depreciating it appropriately was not possible. Our accountant suggested we locate similar antiques that have sold in, say, the past year and then adjust accordingly for our specific situation. Right. Like there's a brisk market for antique reed organs down at the mall.
But then I got to thinking ... hmm ... eBay! Sure enough, several pump organs have sold in the past year. I printed the documentation and attached this to our tax return that year to back up the value we assigned, and then deducted from our taxable income.
But enough about me. Let's talk about your castoffs. How can you know for sure the "fair market value" of, say, that sports jacket that's still in great shape or those kitchen items that are still serviceable? You can use the method I used for my little pump organ. Start searching for actual sales of similar items. Visit thrift stores and other outlets that sell previously owned items like the ones you donated. Take pictures, record the data.
Or let someone else do that for you.
The donation valuation workbook, "Money for Your Used Clothing: Tax Year 2013" lists values for more than 1,200 specific items of clothing (many by brand name) and household goods commonly donated to charity. And here's the best part: The values conform to IRS requirements for donated items.
"Money for Your Used Clothing: Tax Year 2013" is guaranteed. If the IRS ever questions you about the fair market values assigned to your donations by "Money for Your Used Clothing: Tax Year 2013," the publisher will respond to the IRS on your behalf with how they got those values ($5,000 limited warranty). If you receive a fine or penalty relating to the values they assigned and you used to file your taxes, the publisher will pay those fines and penalties for you. By using this book, thousands of people have avoided overpaying millions of dollars in income taxes!
If you're like most people, you stuff a bunch of old clothes into bags and claim a $100 deduction, receiving maybe a few dollars in tax benefits. All of that could easily have been worth $1,500 or more if you only knew how to value your donations. The values add up quickly.
To take deductions on your 2013 tax return, you must have already made those donations in 2013. However, you do have until April 15, 2014 to complete the paperwork. Don't let that date get away from you. Get busy today turning all the used stuff you donated last year into cash!
By the way, as an Everyday Cheapskate reader, you can get a huge discount on "Money for Your Used Clothing Tax Year 2013" at only $20 plus s/h at DebtProofLiving.com or call 800-550-3502 M-F, 8:30am to 5pm Pacific. Supplies are limited.
Mary invites questions at [email protected], or c/o Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website and the author of "The Smart Woman's Guide to Planning for Retirement," released in 2013. To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.