Tax Deduction Rules for Charity Donations

If efforts to sell your unwanted stuff are unsuccessful, you can take a tax deduction for donations of used clothing and household items that are in good or better condition. You must be giving to an IRS-qualified organization. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.

You’ll have to do a little legwork to figure out how much you should deduct. The IRS says that the fair-market value of used clothing and household goods is the price that buyers would pay for them in a consignment or thrift shop. Some charities provide valuation guides on their websites to help you figure out how big a deduction you should claim. Choose an amount that makes sense given the garment’s age and quality. Tax preparation software, such as TurboTax and TaxCut, also includes valuation guides.

It’s important to maintain a paper trail of your contributions in case the IRS audits you. Different rules apply, depending on the value of your gifts. If you claim a tax deduction for a noncash contribution worth less than $250, the charity should give you a written acknowledgment that includes its name, the date and location of your donation, and a description of your gift. If the value of your donation falls between $250 and $500, the acknowledgment must also say whether you received goods or services in return (and if you did, an estimate of the value).

The more generous you are, the more paperwork you’ll have to fill out. If your gift is worth more than $500, you must attach Form 8283 to your tax return. For donations valued at more than $5,000, you must also send the IRS a written appraisal of your gift. But you can deduct the cost of the appraisal subject to the 2 percent limit for miscellaneous itemized deductions.

—Mandy Walker

This article also appeared in the September 2014 issue of Consumer Reports magazine.