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.
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 if the IRS ever questions your charitable donation, you have the burden of proving all cash donations. However, if you ever make a single cash donation of $250 or more, the IRS requires you to obtain additional documentation, such as a written acknowledgment of the donation from the Salvation Army.
Donating Household Property
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 $25.
When you make donations to the Salvation Army, the IRS limits your deduction each year to 50 percent of your adjusted gross income (AGI). To illustrate how this works, suppose you donate all the furniture in your home to the Salvation Army before relocating. 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 to deduct on one of the next five tax returns you file.
The IRS has zero tolerance for taxpayers who substantially overvalue property donations to increase their tax deduction. 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 underpay 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.