Happy Boxing Day.
No, dear television news reader, Boxing Day has nothing to do with people in a ring punching each other. So quit making unironic Rocky, Raging Bull and Grudge Match references <sigh, face palm>.
In addition to being Santa's favorite holiday, the day after Christmas is celebrated by most countries in the British Commonwealth and elsewhere in Europe as a day of philanthropy.
Dec. 26 also is St. Stephen's Day, who is celebrated for giving money to the poor. One Boxing Day origin theory is that the holiday was created to honor him on his feast day.
December donation rush: All of December actually is a time of donating in the United States, thanks in large part to the U.S. tax code.
As the latest Weekly Tax Tips item notes, Americans are bombarded by end-of-year requests from charities for donations.
While the nonprofits usually are seeking cash, which in the tax world also covers checks and credit card donations, many will accept used clothing and household goods.
The hubby and I are among those donating property this year. That's our old couch pictured below, which was picked up by a local nonprofit group last weekend. We kept the faux leopard throw pillows.
General goods giving rules: The good thing about giving away clothing that you or your kids have outgrown, as well as furniture and other household goods, is that someone else can make use of your no-longer-needed items.
But be sure that you're giving away items that are in good or better shape. Your local church thrift shop or charity drop off center is not a dump ground.
If your items meet the minimal wear-and-tear standard, then you can claim the value of your donated property as an itemized deduction on the Schedule A that you file with your Form 1040.
What's it worth? The problem some folks face, however, is determining exactly what the property gift is worth.
A reputable charity -- that's one that meets Internal Revenue Service standards; you can use the IRS online charity search tool to make sure your nonprofit is on the list -- will give you a receipt for your donation.
But you'll note that when it comes to donated items, the receipt doesn't include a dollar amount for you to claim.
Coming up with that tax deduction amount is all up to you.
Figuring fair market value: The IRS offers some guidance in Publication 561, Determining the Value of Donated Property.
Basically, you can claim the donated item's fair market value (FMV) on the date of the contribution. Note that time reference, the date of the contribution.
The hubby and I can't deduct what we paid for the couch when we bought it 15 years ago. We have to come up with its FMV a few days ago when we watched it be loaded onto the charity's truck.
So what is FMV? The IRS admits there are no fixed formulas or methods for determining a used item's value. But, according to Publication 561, FMV is the price that the property would sell for on the open market.
In most donation cases, that's basically the price for the item, in its current condition, that a willing seller and willing buyer agree on.
Think garage or yard sale pricing. Visit thrift or consignment shops for the asking price of similar items.
There also are software programs that can help you determine the value of those old shoes and the sweater that you only wore once, the Christmas Day that Aunt Ethel gave it to you. Check out Intuit's It's Deductible, DeductionTraq, H&R Block's DeductionPro and CharityDeductions.com. Some of the programs are part of tax preparation programs, others are stand-alone and some offer some free options or a chance to test-drive the program.
Whatever method you use, be ready to make a good argument for your donation deduction if the IRS ever questions it. That shouldn't be a problem if you're reasonable and fair, as I know all of the ol' blog readers are, in your donation assessment.
You also might find these items of interest: