Careful documentation, including donation selfies, could convince the IRS of your charity deduction claim
Happy day after Thanksgiving!
For many folks, it's time for Christmas shopping, although internet commerce and changing demographics have made Black Friday a tad less chaotic.
For others, it's a day to finally start decking the home's halls (and living rooms and mantels and…). The hubby and I got a head start, putting up our Christmas decorations the first week of November. Hey, at least we waited until after Halloween!
And others spend today doing some end-of-year housekeeping.
I'm not talking about the routine dusting and vacuuming and whatever in advance of more holiday visitors. I'm talking about cleaning out closets, cabinets and garages of clothing and other sundry items that you no longer need or want so you can take them to your local charity-run thrift store.
Donating to charity is one of the recommended 12 tax moves to make by Dec. 31. Regardless of what you give, if you intend to claim it as an itemized tax deduction on your return next year as long as you follow the donation tax rules.
Added donation documentation: A key requirement to write off charitable gifts is to have proper documentation.
And when you donate clothing or other household goods, that means a little extra tax substantiation work on your part.
While your local charity will probably give you a receipt for the items you drop off, in most cases it's a general document simply saying you donated something. Exactly what you claim and how much you tell the Internal Revenue Service it was worth is your responsibility alone.
Fair value rules: That, however, is not carte blanche from Uncle Sam to overvalue your donations. Rest assured that an IRS auditor knows what most commonly donated goods are worth.
The general rule is that you should use the item's fair market value, which shows up as the acronym FMV in various IRS materials like Publication 561, which offers some giving tax guidance. This is what a willing buyer will pay and a willing seller will accept for the property in its current condition.
You can get an idea of the FMV of many household items from the valuation guides provided by major charities like Goodwill and Salvation Army. You can find some of the amounts for commonly donated items in my earlier spring cleaning post.
You also can get an idea of what used items are worth by checking out the prices at your local thrift or consignment shops.
Assessing propert value: OK, you know what you want to claim as an item's value and it's a bit more than the FMV you've seen elsewhere. Should you knock it down a few bucks or go for it?
That depends on how committed you are to your pricing analysis, as well as whether the increase will actually do you that much tax good.
If you are determined that your FMV is fair because you gave away those slacks that were a bit snug when you bought them and you wore them only once (like that red pair at the back of my closet that I swear I will one day fit into again!), then go for it.
Just be prepared to convince an IRS examiner if he or she questions it.
Visual proof of your FMV claim: A good way to do that is with digital documentation. Take a picture of the items you donate, clearly showing that they truly were in very good shape, worthy of the slightly greater amounts you've assigned them.
Even better, make them donation selfies.
Include yourself in the photos to prove that the topnotch items were yours, not just photos of well-kept articles that you downloaded from someone else's social media stream.
However, I caution against trying to fit into those aforementioned pants for the photo. We did just finish our Thanksgiving feasts and you (OK, I) wouldn't want to split the seams, lessening the FMV you can claim.
Using such photographic evidence is not uncommon. The IRS and state tax departments have for years accepted digital documentation when it comes to tax claims.
Recently, a traveling taxpayer even used selfies to help substantiate his tax residency claim.
In most cases, you probably won't have to prove your donations' value, using selfies or other documentation. But you need to be prepared just in case.
So get yourself and all those old clothes camera ready! Then smile, snap the shots and head to your favorite charity's drop-off center.
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