Face it, you’ve been putting it off all year. Maybe you have to turn sideways to get in the storage room or have given up on parking your car in the garage. Well, it’s the end of the year and now you have a big incentive to clean out all that stuff! You could get a tax deduction for it.
If you itemize your deductions (use Schedule A), Uncle Sam will give you a bonus – a deduction on your tax return for donating all that stuff to a charity. This could result in a larger refund for you, but there are a few simple rules you must follow to benefit from this tax break.
First, the charity must be recognized as an exempt charitable entity. Qualifying are churches, schools, Red Cross, Amvets, Scouts, Salvation Army, Disabled American Vets, public libraries, etc. If in doubt, ask the organization or check the IRS website at IRS.gov.
Second, make sure you get a receipt from the charity for the donation. You’ll need it as proof of your donation. If your total non-cash donations are less than $500, you can list the amount on Schedule A. If more than $500, you are required to attach Form 8283 with the following information:
Make a list of the items you are donating to attach to your receipt. (Keep this receipt with your records – do not send in). Form 8283 asks for date of purchase (can be various) and the date of the gift, the name of the charity and a list of the items donated. Additionally, you must indicate how you determined fair market value. Cost is what you paid and value is what you could have sold it for at a thrift shop or garage sale.
Think of all those kitchen appliances no longer used; old toys the kids have outgrown; clothes that don’t fit or are out of date; books, tools, games, furniture and anything else you no longer want. It is fairly easy to rack up $1000 in fair market value resulting in an additional refund of $250 if you are in the 25% tax bracket. A new wrinkle beginning for tax year 2006 deductions is that clothing must be in above average condition – no more old socks, underwear and soiled clothes you used for painting! So, get busy – get rid of the extra stuff, simplify your life and enjoy that larger refund!
Let Accounting & Tax Solutions, Inc. help you navigate through the many regulations and nuances of the tax laws, to ensure that you receive the expert advice of a licensed tax practitioner: Contact Form