Taking a charitable deduction for your donations of used clothing and household items can save you some money on your tax bill. Calculating the amount of your deduction will require you to estimate the fair market value for each item donated. However, to make sure you value the items appropriately, you need to follow Internal Revenue Service guidelines.
Used Clothing Values
You must determine the fair market value of your clothing donations, based on the resale prices that consignment and thrift shops charge for similar items of clothing in comparable condition. But rather than travel to all the thrift shops in your area, you may find the Salvation Army’s valuation guide to be a helpful resource. The guide is available online at the Salvation army website and provides a range of values for commonly donated clothing and household items. One thing to keep in mind when donating clothes is that the IRS doesn’t allow you to take a deduction for any clothing that’s not in good wearable condition.
Valuing Household Items
When donating household items, such as furniture, appliances and flatware, it’s important to note the condition of each item to help determine its fair market value. For example, if you donate a 10-year-old white leather sofa, the Salvation Army valuation guide indicates a value range of $35 to $200. If the sofa is riddled with stains that can't be removed, a more reasonable value will likely fall closer to the $35 value. But if it's in near- perfect condition with very few signs of wear, a more reasonable value may be closer to $200. Note, however, that If any item has a zero value – meaning it would be tough to find a buyer willing to pay even a dollar for it – you can still make the donation, but you won’t be able to take a deduction for it.
Appraisals & Form 8283
In the event you donate a piece of clothing or a household item that is not in "good" condition but still has a value in excess of $500, you must take some extra steps. You’ll need to obtain a written qualified appraisal and attach it to your return. A qualified appraisal is also necessary for any item, or a group of similar items, that are donated in good condition and have a value in excess of $5,000. Although there are some exceptions, it’s generally not necessary to attach the appraisal to your return for these items. You will need to report these donations on Form 8283 and have the appraiser sign the declaration on it.
Incorrect Valuation Penalties
To discourage taxpayers from reporting larger charitable deductions than they're entitled to take, the IRS can impose two penalties if it finds that household item and clothing donation values are inflated. If the value of your donations are 150 percent or more than their fair market value and the overvaluation causes you to underpay your income tax by more than $5,000, you will need to pay the correct amount of tax; you will also be charged a penalty of 20 percent on the amount of tax you underpaid. A 40 percent penalty will apply instead if the value reported is 200 percent or more than the true fair market value.
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.