[Editor’s note – this article was updated on 07-02-19 to reflect current tax years and links]
One common and easy way to help a charity is to donate your good used clothing, furniture, and household goods.
Besides a clean house with more usable space, you may also receive a tax deduction for the fair market value of your donations. A tax deduction on your income tax return can mean more money for you to pay bills, enjoy, invest, or to donate to charity.
To claim a deduction on your 2019 Federal tax return for clothing and furniture donations, you will use the Schedule A (Itemized Deductions). Yes, this means that you must be able to itemize deductions in order to claim a Federal deduction for a donation in 2019. In general the total of your itemized deductions (property taxes, mortgage interest, medical expenses, donations, etc.) must exceed $12,200 for single filers or $24,400 for joint filers. If you are over 65, you get an even higher standard deduction. Even if a donation does not help your Federal tax return, you may still be able to take a donation deduction on your state tax return.
One common question with donated clothing, furniture and household goods is how to figure the IRS donation values.
The short answer is that you will be able to deduct the lower of the fair market value or your cost basis of the donated property.
Figuring your cost basis is simple. Your cost basis is how much you paid for the item. You may also add in any additional costs to improve or prolong the life of the item. For example, you may have paid $55.00 for a pair of shoes. $55.00 would be your cost basis.
As another example of cost basis with extra costs, you may have paid $50.00 for a dresser at a garage sale, and then another $25.00 to buy new handles, glue, and paint to improve it. Your cost basis in the dresser would be $75.00.
Note, though, that the amount you can deduct is the lower of the cost basis or the fair market value. For most taxpayers, fair market value is what they will use on their tax return to value their donations.
So how do you figure the fair market value of donations? Good question and the simple answer is: fair market value is the amount that you could sell the item for. Usually this will be the thrift shop or garage sale price.
Here are some resources to help you value your donated goods:
Goodwill Industries – Donation Value Guide This Goodwill page has a link to a downloadable booklet which gives guideline values for clothing, household goods, and furniture. The link is toward the bottom, under the section Taxes and Your Donations. For example, according to the Goodwill guide, a woman’s shirt in good condition would have a fair market value of $2.00 – $12.00.
The Salvation Army also has a guide – Valuation Guide for Salvation Army Donations In their guide, the Salvation Army values a woman’s blouse between $2.50 and $12.00, similar to the Goodwill values.
If you frequently shop at garage sales or thrift shops, then you likely already know what prices are reasonable for valuing your clothing and other items.
Other things to keep in mind for tax return purposes when donating clothing, or household goods:
The condition of the items must be at least “good” condition before the IRS will allow a deduction.
The donation must be made to a qualified charity. Giving furniture to a deserving family is a worthy action, but it will not be tax deductible because the family is not a qualified charity. Use IRS Search for Charities – (previously Publication 78) to see if your charity is qualified.
Keep a detailed list of your donated items, or snap multiple photos for your records. Also keep notes on the date of the donation, the address and name of the charity that you donated to.
If your donation value will be $250.00 or more, be sure to get a signed, dated receipt from the charity.
If all of your noncash donations for the year total $500.00 or more, you will need to report the details on Form 8283. The Instructions for Form 8283 are also a good resource of information on donations of noncash items.
IRS Publication 561 has good information – Determining the Value of Donated Property
Simple Life Corp has a more detailed article on taxes and giving items to charity – Is Your Donation A Tax Deductible Donation?
How much will a donation of household items affect your Federal taxes?
Let’s use the women’s blouses as an example. Say you do a major clean-out of your closet and end up donating a variety of 20 women’s blouses in good to excellent condition to Goodwill Industries. Using Goodwill’s valuation chart, you value these at $8.00 each. This gives you a deduction of $160.00. If you can itemize and you are in a 22% tax bracket, you will reduce your taxes by $35.20. Not bad for an hour or two of cleaning out your closet.
Even better, you’ve helped out a charity, you now have a simpler, less crowded closet, and you got a few extra dollars to donate, spend, or invest. Now that’s The Fat Dollar way!
This article is for guidelines only and not to be considered specific tax advice. Consult your tax professional for specific advice on deducting donated items on your tax return.