Do you donate old stuff to places like Goodwill or Salvation Army?
Every now and then do you go through the house and get rid of lots of old stuff you don’t want or need. Old clothes, toys, kitchen items, funiture, etc. Do you just give that stuff away to be rid of it?
Do you just take the typical $500 deduction on your taxes?
The way the rules work, if you want to deduct all that stuff you’ve given away you have two choices: 1) Take the maximum allowed amount of $500 without itemizing what you donated, or 2) take the full value of your donation by itemizing everything you donated and approximating the “thrift store value” of each item. My guess is you take the easy way out and just do option #1.
Stop Throwing Money Away!
8283ez (named after the IRS Form 8283 for itemizing non-cash donations) is a really simple, free tool that let’s you itemize all those things and take the full value of your donation as a deduction on your taxes. Using the Salvation Army’s Donation Value Guide, 8283ez let’s you quickly itemize the things you’ve donated and save a report for later when you do your taxes at the end of the year.
Take a look at the math
Let’s assume you’re like a typically household that pays about 30% in taxes (Federal and State combined). And let’s assume that the value of your donated items when itemized is $1,200.
Standard maximum $500 deduction
$500 x 30% =
$150 less taxes
Itemized $1,200 deduction
$1,200 x 30% =
$400 less taxes
That’s a $250 difference of actual money in your pocket. Now imagine that you’re giving stuff away two, three or four times a year and saving that kind of money each time.
Here’s How It Works
For clothing or household items, the IRS accepts a “thrift shop valuation” method for determining the value of donated items. The Salvation Army has a handy guide they’ve published which covers most of the common items. When you jump to the app you’ll see that Salvation Army guide on the left side of the screen, and your list of items on the right. Just start clicking away and build your list.
In the Salvation Army’s guide, they list a range of high and low values for common items. The app puts an initial estimate of the value of each item you add by using the mid-point between the high and low value from the Salvation Army. You may change the value to an appropriate amount. Maybe it’s in great condition and should be higher. Maybe your dog used it as a chew toy and it should be lower. It is up to you. The guide is there just to help you decide.
If you can’t find an item in the Salvation Army guide, then you’ll have to add it yourself and try your best to determine a fair value (maybe see what it sells for on eBay?). For big items like cars, fancy jewelry or artwork, you probably need to get an appraisal if it’s over $500. I’d recommend you check with your accountant if you have any doubts.
Once you’ve created your list, go ahead and generate a PDF report that you can print, save, email, etc. Just remember to have it handy when you (or your accountant) gets ready to complete your taxes.
Here are a few items on the web which cover the topic of non-cash contributions in more depth. Remember to check with your accountant if you have any doubt about what is ok in the eyes of the IRS.
- A good article our CPA found on Marketwatch that explains the rules for deducting things
- A comparison of deductions taken by the average American, broken down by income
- The IRS’ own published statistics of average deductions taken in 2012
- A guide to completing Form 8283
- The actual IRS Form 8283
- The IRS instructions for Form 8283
- There is also an online Goodwill valuation guide, but according to the file properties it hasn’t been updated since January 2011 so I don’t think it is current.
A few last disclaimers
My accountant thought the following should be mentioned here:
- The report generated by 8283ez does NOT replace the receipt issued by the folks to whom you donated your items. Their donation acknowledgement (which ideally will be signed and dated by somebody from the organization) should be kept ALONG WITH the itemized report generated by 8283ez.
- 8283ez is a useful tool for completing Part A of the Form 8283, as opposed to Part B which is for any single item over $5,000 or any group of similar items over $5,000. If you have something like that, you should talk to your accountant about what you need to do for your tax prep. But if you’re like most folks, which a bunch of random stuff that you gave away, this is the tool for you.
- While it’s true that most people who give things away to charity just take the standard “$500” amount and don’t worry about itemizing things, the burden of proof for taking even that amount is still on you if the IRS ever comes knocking on your door looking for more information. The best thing you can do to protect yourself is to have a list of the stuff you donated already prepared, along with a thrift store’s valuation guide for reference for each of the items you’ve donated. So even if you are only going to deduct $500, you probably want to use 8283ez just to be safe.
How Much Does This Cost?
Nothing. Nada. Zip. Zero.
My name is John Haldi (LinkedIn link is below – that’s me in the picture). I built this thing because I wanted something simple and quick to use when I had to itemize my own donations. Once it was built, I thought other people might find it useful and it really wouldn’t cost me much to put it on the web and make it available for anybody to use.
So have at it. I hope you find it useful, and that it helps you save money on your taxes. Feel free to tell your friends about it if you like. The more the merrier.
And if you can think of ways that I could make it better please let me know.
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Anyone who puts together a useful tax site for grins deserves a round of applause. Thanks, John. Thank you for the email introducing this old accountant to a new (and useful) way to do business. You made my life, and that of my clients, better. A good day in my book.
Don’t Be Shy
If you’ve got an opinion about this, I’d love to hear it. Please just use the form below to get in touch.