One of the benefits of itemizing your expenses on Schedule A is that it allows you to claim deductions for the cash and property donations you make to tax-exempt charities, such as the Salvation Army. However, itemizing isn’t the only requirement for claiming a charitable deduction; you must also satisfy a number of eligibility criteria the IRS imposes on all tax-deductible donations.
Read More: Acceptable Items to Donate to the Salvation Army
Salvation Army Donations
When making tax-deductible cash donations to the Salvation Army, the IRS requires that you retain sufficient proof for each separate donation, regardless of the amount. At a minimum, you must obtain a receipt from the Salvation Army, a credit card or bank statement, or a canceled check. It is not necessary to attach the document to your tax return, but you will need to keep your receipts in case the IRS requests to see them later.
Donating Clothing and Household Goods
The Salvation Army frequently receives used household items from the public that it resells in its thrift stores throughout the country. When you make a donation of used clothing, furniture, or household appliances, it’s your responsibility to assess its fair market value at the time you make the donation since the total value is the amount of your deduction.
Fortunately, the Salvation Army makes it easy for you to estimate property values since it provides a Valuation Guide for the property that taxpayers commonly donate to the organization. For example, if you donate a jacket that no longer fits your child, the organization suggests you report a minimum value of $3, but no more than $26.
Read More: How to Estimate Charitable Clothes Donations
Special Deduction for 2021 Tax Year
Individual taxpayers can deduct up to $300 and married taxpayers filing jointly can deduct up to $600 in cash donations. The IRS joined the Independent Sector and National Council of Nonprofits to allow more taxpayers to deduct their donations to qualifying charities.
Under this temporary provision, deductions don't need to be itemized. This law can potentially benefit up to 90 percent of tax filers.
As a rule, taxpayers who take the standard deduction can't take a deduction for their charitable contributions too. It effectively amounts to double-dipping. For the 2021 tax year, taxpayers can claim a limited deduction on their federal income tax return for cash contributions made to qualifying charities by December 31, 2021.
Limits on Tax-Deductible Donations
According to the IRS, the following limits only apply to taxpayers who have made charitable donations amounting to more than 20 percent of their adjusted gross income (AGI). If you wish to make a non-cash donation to the Salvation Army, the IRS limits your deduction annually to 50 percent of your AGI.
For example, you are downsizing and decide to donate your existing furniture to the Salvation Army. If the fair market value of your home furnishings is $20,000, you can deduct the entire value in the year you make the donation provided your AGI is at least $40,000. However, if you report an AGI of $30,000, that year, your maximum deduction is $15,000.
You don’t lose the deduction for the excess $5,000; instead, you carry it forward in each of the next five years until you have exhausted the deduction. The deduction can't be carried forward for more than five years.
Read More: Advantages of Donating to the Needy
The IRS has zero tolerance for taxpayers who substantially overvalue property donations to increase their tax deductions. If you inflate the value of a property donation you make to the Salvation Army by 150 percent or more, the IRS will increase your tax bill by 20 percent of the tax you underpaid as a result of the incorrect valuation. However, for more egregious violations of 200 percent or more, the penalty increases to 40 percent.
Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.