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Donating clothing, household goods, even donating old magazines is a powerful way to clear out clutter. It channels good useable items to the people who will appreciate them or to the organizations that oversee finding the right use for your donation.
A big bonus to donating your items is that you may be making a tax deductible donation. Follow a few simple rules and you just may find yourself with a lower tax bill next April 15th.
First and foremost, the organization that receives your donation must be an organization or foundation that is religious, charitable, educational, scientific, or literary in purpose, or one that works to prevent cruelty to children or animals. It must also be qualified to receive tax deductible donations. There are virtually no exceptions to this IRS rule, at least not to the common taxpayer. Donating directly to indivuduals or families in need is very worthy and sometimes the best route, but it is not tax deductible.
So how can you tell if an organization qualifies as a charitable organization with the IRS? As a start, you can either ask them or you can take a good look at the receipt that they gave you. Most qualified organizations will state on their receipt that they are a 501(c)(3) organization or that your donation is tax deductible.
If you are uncertain, then check the deductibility of donating to any organization by either checking the IRS website , looking for your charitable organization by using the online IRS search of Publication 78, or by calling the IRS Taxpayer Service number in your area and asking if a specific charity is qualified as a not-for-profit charitable organization and if a donation to this charity would be tax deductible. Information on deductible charitable contributions can be found in IRS Publication 526 and also in IRS Publication 561.
Now that you have determined that the organization qualifies for tax deductible donations, there are still a few other IRS rules to follow:
- If you are donating clothing, it must be in good condition or better. Stained, torn, badly worn, or otherwise fair to poor condition clothing no longer qualifies for a tax deductible donation. Note that if your clothing item is unique, or perhaps a collectible item, you may be able to get an appraisal and still take the tax deduction. Ask your tax accountant or CPA about this.
- Remember that the IRS requires you to get a written receipt or acknowledgement for donations of goods, such as clothing or household items, that are valued over $250.00.
- For any donation to be tax deductible, whether a receipt is required or not, you must keep detailed records regarding the items donated, the date of the donation, and the name and address of the charitable organization. The description of the donated items should include the condition of the item and the quantity. For example, you might say "5 (five) long-sleeved women's dress blouses in like-new condition." One good way to supplement a detailed receipt is to take multiple well-focused pictures from multiple angles of your donations.
- And finally, in order to use a tax deductible donation, you must File Schedule A (Itemized Deductions) and possibly Form 8283 (Non-Cash Charitable Contributions) and have enough in total itemized deductions to itemize. If you take the standard deduction on your Form 1040, 1040A, or 1040EZ, then you will not be able to receive a Federal tax benefit from your donation. Check with your tax accountant or CPA to see if you might still have a tax deduction on your state return.
Make sure that the organization is qualified with the IRS to receive tax deductible donations
Be sure that donated clothing is in good condition or better
Get a written receipt if the value of the donation will be $250.00 or more. It is still advisable, although not a requirement, to get a written receipt regardless, especially if you will be giving multiple donations of under $250.00.
Keep detailed records of the name and address of the organization you donated to, the date of the donation, and the description, quantity, and condition of your donated clothing or household items. Snapping photos is an excellent supplement.
Remember that donations of clothing, household items, or other non-cash goods is an itemized deduction.
The IRS has some examples of organizations that are and are not qualified for tax deductible donations (Publication 526):
Likely Qualified (abbreviated list):
Churches, schools, hospitals, public parks, Salvation Army, Red Cross, CARE, Goodwill, United Way, Boy Scouts, Boys and Girls Clubs of America, Veterans groups.
Usually not qualified (abbreviated list):
Civic leagues, sports clubs, chambers of commerce, foreign organizations, for-profit groups, political groups, homeowners associations, individuals, country clubs.
See the Publication 526 at www.irs.gov for more details.
Article written by Patricia Tokar, CPA
Wondering how to value your donated clothing and household items? Watch for our article (coming soon).