It’s tax preparation season, the time of year when you get rewarded for all of your efforts of having a yard sale and then donating the leftover items to charity. You diligently got your donation receipt and filed it away with a detailed list of what you donated. Good job!
Now you have one very important last step. You need to determine how much you can deduct on your taxes for everything you donated. IRS Publication 526 “Charitable Contributions” explains . And IRS Publication 561 “” says you may deduct the Fair Market Value of the item.
How do you determine Fair Market Value?
Fair Market Value (FMV) is defined as “the price that property would sell for on the open market.” So, how do you determine the price someone would pay for the sweater your Aunt Martha gave you for Christmas five years ago? Fortunately, there are several free sites that will help you on this pricing journey.
– This is the official Salvation Army pricing. Limited in scope, but excellent and giving you an idea of what items go for at their stores. For each item, they list a low and high amount.
– Also limited in scope, but lets you understand that a sweater is a sweater. It doesn’t matter how expensive it was at the retail store. Now they are all priced almost the same. This is the reason why you can snag great deals on designer clothing at Goodwill stores. For each item, there is a price range divided by whether the item is for women, men, or kids.
– This is a fabulous, free online resource. You can input your donations as the year goes on and the system tracks all your donated items and the current total donation value. The only drawback to this application is that you can’t print out a detailed report of all the items unless you buy the rest of their software and use their online e-filing. But you don’t have to upgrade to get a lot of use out of ItsDeductible. Note: A reader reported that ItsDeductible inflated the value of donations, resulting in penalties from the IRS. So use with caution!
– This website has valuations for thousands of items and provides printable reports for your records and accountant for less than $15/ tax year. It works for anyone with an internet connection and has a money back guarantee. Plus, you can start a FREE trial before committing to pay!
None of these lists will have suggested FMV prices for everything you donated. However, by studying the FMV of items that are on the lists, you will get an idea of how much to deduct for comparable items that you’ve given to charity. I guarantee if you make a detailed value list of all your donated items, you will be nicely surprised at the total amount you can claim.
If you have any other ways to determine Fair Market Value, please share them!