Trash or Treasure; Donations of Noncash Items

Do you have items in your home that are just taking up space?  Or closets that are overflowing – and you wear only a small percentage of what is hanging there?

Kill 2 birds with one stone.  Clear out your house and donate the items to charity.  There are several charities that run thrift stores and will make use of your “stuff”.  In Idaho, there are a few charities that also have Idaho tax credits for donations made to them.  These organizations support education and rehabilitation.  Idaho Youth Ranch and ARC are 2 such organizations that take ‘gently used goods’ and also are eligible for tax credit on your Idaho return.  (See the instructions for Form 39R for a complete list of charities/organizations that receive tax credits in Idaho).

For myself, I have set a goal of clearing 10 boxes of ‘stuff’ from my house annually to maximize the tax credit.  And it helps keep the house thinned out – win, win.

Cars are another popular item to donate.  That is probably why IRS has a publication, IRS Publication 4303, A Donor’ Guide to Vehicle Donations.  This donation is on the IRS radar so be sure you follow the directions.

Not every charity is set up to handle car donations.  Many use an intermediary agency.  You want to check with the agency and the charity as to what percentage the charity receives.

When transferring the car to the charity, be sure the car gets retitled.  The charity may want to leave the assignment of ownership blank so they don’t have to retitle.  If that is the case, find another charity.  Until that car is retitled, you are legally the owner.  And you are responsible for parking tickets and misuse of the vehicle.

What amount can you take as a donation?  The IRS rules require the value to be determined by the actual sale of the vehicle; especially if it is over $500.00.  Charities will give you an initial receipt of the donation and follow-up with a letter stating the amount received on the sale.

To claim the deduction, you will need to complete IRS Form 8283.  If the car is worth more than $500.00, fill out Section A of the form.  If a donated item is worth more than $5,000.00, you need an independent appraisal and complete Section B of Form 8283.

There are several exceptions which allow you to use the Kelley Blue Book or NADA guide.  However, you need to use the Fair Market Value, and not just the highest value listed for the year and make of your car.

Use the Fair Market Value:

  • When the charity keeps the car and uses it.
  • Charity makes improvements to the car before selling it.
  • Car is sold at a discounted price to a person of low income.
  • Or if the car is worth less than $500.00.

Other non-cash items you may want to donate are appreciated assets:  Items, such as stocks and real estate.

Donating appreciated stock removes the capital gains tax bill from your portfolio.  And you receive a tax deduction for the donation equal to the value of the charity.  Most charities can readily receive the transfer of stock.

The charity can sell the stock, and use the cash.  Because they are a non-profit, the sale of stock by them isn’t a taxable transaction

For all non-cash donations, you need a receipt.  While cancelled checks can work for cash donations, IRS likes to see a receipt from a charity, especially if it is over $250.00

 

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