Spring is in the air, meaning it’s that time of year when people start fresh. Homeowners go through their home, and get rid of old clothes, furniture and unwanted items. But what if you could declutter your life, help others and save money all at the same time?
Donating money or non-cash items to qualified charitable organizations can help you save on your 2013 tax return by increasing your itemized deductions. As such, taking steps now can lead to a fatter tax refund next year.
But what items should you consider for donation when you start your spring cleaning spree? Let’s take a closer look at the requirements for various items.
• Used clothing. Old clothes are almost always in high demand throughout the country. However, only donate clothing that is in good condition, and use the fair market value when determining the value of non-cash items. Free tools like Turbo Tax ItsDeductible can help you determine the FMV of non-cash donations, and make tracking your donated items easier. The Internal Revenue Service uses the average price buyers pay at thrift or consignment stores as an estimation of an item's FMV.
• Household goods. Charitable organizations are often in need of items such as dishes, cutlery and appliances to help individuals and families settle into a new home. Used cookware and furniture must also be in good condition to be eligible for donation.
• Jewelry and gems. If you plan on donating jewelry or gems to a qualified charity, be sure to obtain a written assessment from a specialized jewelry appraiser. IRS regulations on how jewelry donations are deducted vary depending on how the item is used by the organization.
• Cars and boats. What a charity does with the car or boat you donate can impact the size of the deduction you can claim. If the charity sells a donated car for more than $500, you can deduct the smaller of the proceeds or the vehicle’s FMV on the date of contribution.
• Stocks and bonds. There’s an added bonus in donating these types of financial commodities. If you’ve owned a stock for a significant period of time, its value may have doubled or tripled. When donating appreciated stock to a charity, you may avoid capital gains tax since the FMV of donated stock held over one year is the value on the date you sell it – not the date you purchased it. For those who make sizable donations each year, this is a smart strategy to maximize your charitable giving while minimizing your taxable gains.
Before taking your donations to the charitable organization of your choice, check the IRS list of approved tax-exempt organizations. Also ask for a receipt from the charity, so you’re eligible to deduct the value of the donated goods. Donations worth more than $250 must be accompanied by a written record, while those more than $5,000 require a written appraisal. Helping those in need is a fulfilling deed, and getting more money come tax time in the process makes charitable giving that much sweeter.
Lisa Greene-Lewis is a certified public accountant and TurboTax tax expert. She has more than 15 years of experience in tax preparation, including positions as a public auditor, controller and operations manager. For more tax-related tips, go to blog.turbotax.intuit.com.