If you made donations to Goodwill Industries, the Salvation Army or any other tax-exempt charity, you might be able to take a tax deduction. Donations of household goods and gently used clothing typically don't need to be listed individually on your tax return. However, details may be necessary if you donate higher-valued items.
Not only will charitable contributions assist with delivering items of value to those in need, it could also help you reduce your tax obligations at the end of the year. If the total value of your donations is less than $500, you are not required to list each donation. However, you must use IRS Form 8283 if you exceed this amount.
General Deduction Requirements for Donations
You cannot take a tax deduction for any donated item that's not in good usable condition unless its value exceeds $500, in which case you attach a qualified written appraisal to your tax return and list the details of the donation on Form 8283. This means that if you donate a piece of clothing, such as a coat, it doesn't need to be immaculately clean or in new condition, but it can't be in need of repairs before someone can use it to keep warm. For example, a jacket that's missing a zipper or has too many holes, rips or tears might not satisfy the good-condition requirement. These same rules equally apply to donations of household items, such as used furniture and appliances.
Fair Market Value of Your Donations
When donating property to a charity, the amount you can deduct on your taxes for each item is equal to its fair market value. Fair market value isn't determined using standard formulas, such as a fixed percentage of the price you paid for it. Instead, a donation's value reflects the price that Goodwill and other charities can charge to resell it. The Salvation Army publishes a donation value guide on its website that you can reference to review the range of prices usually obtained by the organization for commonly donated clothing and household items. But you also need to take into account an item's condition: whether it's in style, whether there's a demand for it and whether someone will find the item useful.
No List Required for Schedule A
If the total value of your annual donations is $500 or less, you can take the charitable contribution deduction without listing each donation on a tax form, but you do need to itemize. If you choose to itemize, you no longer can take the standard deduction applying to your filing status. When itemizing on Schedule A, you'll enter the sum of your property donations on the designated line within the “Gifts to Charity” section of the form. The IRS does, however, require that you retain a receipt or other written proof of each donation unless it's impossible to obtain one, such as when you make a donation at a Goodwill drop-off box.
Listing Donations on Form 8283
Listing your donations on Form 8283 is required if your donations are worth more than $500. Provided you don't take a deduction in excess of $5,000 for any single donated item, or group of similar items, you'll only have to list the charity's name and address, and a short description of the item. For each donated item in which you take more than a $500 deduction, you'll also need to list the dates you acquired and donated the item, how you originally obtained it, the price you paid if purchased, its fair market value and details on how you arrived at its value.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.