It is possible to qualify for tax deductions for donating clothes and household items, but you must know the rules to properly claim the deduction and avoid possible tax penalties. If you have some extra clothes or other items that you no longer need, donating them to a charity does more than just allow you a tax deduction. Depending on the charity, the charity may be used in a variety of ways including being given to those in need or used to stock a retail store that provides job training.
Basic Rules
In general, all clothing and household items donated to a charity must be in ‘good’ condition to qualify for a tax deduction. Though the IRS does not expressly state what qualifies as good, one way to make the determination is to simply ask the charity if they can sell or use the item in question. The donation must be made to a qualified charity, referred to by the IRS as a 501(c)(3) organization. You cannot claim a deduction for a donation to an individual.
Valuing Donations
The IRS states that the item being donated must be valued according to what it would sell for in the marketplace as in its present condition as a used item. Though this can be difficult to determine, many larger charities provide price guides for commonly donated items (jeans, dishware, furniture, etc.) to provide guidance on determining value of donations.
Written Documentation
For donations less than $250, you should get a receipt from the charity, but it is not mandatory if it is impractical. For example, if you give donations by use of a drop box, the box cannot provide you a receipt. In this case, you should create a written record of your donation detailing the items donated, the charity, and the date and location of the donation. However, when the amount of donations that you give in a tax year exceeds $250, the IRS requires you to have a written receipt of the donation from the charity. The receipt generally must note the name and address of the charity, the date of the donation, a description of the items donated and the value of the item. Charities are generally familiar with these rules and will provide proper receipts. For donations over $500, you also need to document the date you obtained the item and how you obtained the item as well as the cost of the item if you owned it for less than a year.
Appraisal
For clothing or household items, any single item worth more than $500 requires a written appraisal. For other items, if you donate one single item or one group of items worth $5,000 or more you need to obtain a written appraisal of the item’s value. The appraisal must come from a properly qualified expert, a person having the education and experience needed to properly value the item. For all donations, especially high value donations, it is advisable that you discuss the donation with a tax professional before making the donation.
Other Donations
In addition to clothing and household items, you can donate almost anything of value to a charity and receive a tax deduction. This includes timeshares as well as stocks and bonds. As a general rule, the more valuable the donation, the more documentation you will need. There are also special rules when donating automobiles. For high value donations, it is best to consult with a tax professional before making the donation to make certain the donation is made properly.