How Much of a Tax Deduction Do I Get From Donating Furniture?
Whether you're moving and don't want the hassle and cost of packing and shipping your old furniture or your year-end bonus is allowing you to upgrade, donating your old furniture to charity is a benevolent act and a tax-saving strategy. The furniture must be in "good used condition" or better to be eligible for a deduction when you file your tax return.
Fair Market Value
The general rule for furniture donations is that you can write off the fair market value of the furniture. The Internal Revenue Service doesn't give specific values for figuring fair market value, but rather says it's the price that a willing seller would offer and a willing buyer would pay. Some charities publish lists estimating prices for furniture based on condition to give you an idea of the fair market value for different pieces of furniture.
Adjustment for Gains
You have to reduce the fair market value of the furniture by any amount that would constitute ordinary income if you had sold it instead of donating it. This includes the price of the furniture above the cost of the materials if you made it or the increase in value over what you paid for it if you've owned it for less than one year. For example, if you get a great deal on a desk and donated it the next day, your deduction is limited to what you paid for it. Furniture counts as tangible personal property, so you also have to reduce the fair market value by any long-term gains if the charity doesn't use the furniture itself. For example, if you donate the furniture to a charity that sells it to raise money, you're limited to deducting what you paid for the furniture. However, if the charity were to give it away to a needy family, you wouldn't have to take out the long-term gains.
The IRS limits the maximum you can deduct from your taxes for charitable donations to 50 percent of your adjusted gross income for the year. If you donate the furniture to a 30 percent limit organization, your deduction can't exceed 30 percent of your adjusted gross income. These organizations include veterans' groups, nonprofit cemeteries and fraternal groups. If you're donating furniture that has increased in value, these limits drop to 30 percent and 20 percent of your adjusted gross income, respectively.
You'll only save money on your taxes from donating furniture if you itemize your deductions. Sure, you say, I'll do that. However, when you itemize, you give up the standard deduction. Your itemized deductions, including your furniture donation, should exceed your standard deduction. If you don't itemize, you won't get any tax deduction for donating your furniture.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."