How to Figure Fair Market Value Donations
Use available online sources to set the fair market value., Make your best good-faith estimate of value., Use a tax software program to determine a fair market value., Research comparable items in local stores that sell used clothing and household...
Step-by-Step Guide
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Step 1: Use available online sources to set the fair market value.
In order to deduct the value of donated items, you need to claim the fair market value.
This is the price that you could expect someone to pay for the item if you offered it for sale.
Some of the leading donation markets, The Salvation Army and Goodwill, for example, have websites that provide reasonable fair market values for a wide range of items.
For example, the Salvation Army valuation site, https://satruck.org/Home/DonationValueGuide, sets recommended values for such diverse items as air conditioners, kitchen utensils, and an array of clothing items categorized by age and gender.
Craigslist.com is another option for determining the valuation of household items like appliances and furniture. -
Step 2: Make your best good-faith estimate of value.
The online valuation sites generally provide a “low” and a “high” value for each item on their list.
It is your job as the owner to decide where on that scale to set the value.
If you believe your items or clothing are in excellent condition, you should select a value near the “high” end.
If you believe that the items are in poor or fair condition, select a value near the “low” end.
Your decision is not likely to be questioned by anyone.
Once the donation has been made, there's little chance of a review of your particular items.
You are basically on your honor to make a fair and honest valuation. , If you file your taxes using a commercial software program like TurboTax, H&R Block, or TaxAct, you will be prompted by the program regarding any charitable donations.
The software will ask you to identify the items you donated and their condition (good, fair, or poor).
The program will then assign a reasonable value to your donations. , Before making your donations, you can visit local shops that market similar items.
Look for things that are similar in quality to yours.
Make note of the prices that you find, and keep these notes as a record.
Include the date and location of your visit, just in case you ever need to substantiate your valuations.
Consignment shops are a good resource for determining the value of higher priced clothing items, such as coats, business suits, dresses and evening gowns.
Visit thrift shops to determine the value of lower priced clothing and household items. , If you have a single piece of clothing or a household item that is worth more than $500 and is in less than "good" condition, you must obtain a professional appraisal of the item before donating it.
You do not need to attach the appraisal to your tax return, but you should keep it for your records in case your donation is questioned. , Keep a record of all donations you make during the year.
When you prepare your tax return, complete IRS Form 8283 and attach it to Form 1040 if the fair market value of non-cash donations exceeds $500. -
Step 3: Use a tax software program to determine a fair market value.
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Step 4: Research comparable items in local stores that sell used clothing and household items.
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Step 5: Get a professional appraisal for valuable clothing items.
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Step 6: Report your fair market valuations to the IRS.
Detailed Guide
In order to deduct the value of donated items, you need to claim the fair market value.
This is the price that you could expect someone to pay for the item if you offered it for sale.
Some of the leading donation markets, The Salvation Army and Goodwill, for example, have websites that provide reasonable fair market values for a wide range of items.
For example, the Salvation Army valuation site, https://satruck.org/Home/DonationValueGuide, sets recommended values for such diverse items as air conditioners, kitchen utensils, and an array of clothing items categorized by age and gender.
Craigslist.com is another option for determining the valuation of household items like appliances and furniture.
The online valuation sites generally provide a “low” and a “high” value for each item on their list.
It is your job as the owner to decide where on that scale to set the value.
If you believe your items or clothing are in excellent condition, you should select a value near the “high” end.
If you believe that the items are in poor or fair condition, select a value near the “low” end.
Your decision is not likely to be questioned by anyone.
Once the donation has been made, there's little chance of a review of your particular items.
You are basically on your honor to make a fair and honest valuation. , If you file your taxes using a commercial software program like TurboTax, H&R Block, or TaxAct, you will be prompted by the program regarding any charitable donations.
The software will ask you to identify the items you donated and their condition (good, fair, or poor).
The program will then assign a reasonable value to your donations. , Before making your donations, you can visit local shops that market similar items.
Look for things that are similar in quality to yours.
Make note of the prices that you find, and keep these notes as a record.
Include the date and location of your visit, just in case you ever need to substantiate your valuations.
Consignment shops are a good resource for determining the value of higher priced clothing items, such as coats, business suits, dresses and evening gowns.
Visit thrift shops to determine the value of lower priced clothing and household items. , If you have a single piece of clothing or a household item that is worth more than $500 and is in less than "good" condition, you must obtain a professional appraisal of the item before donating it.
You do not need to attach the appraisal to your tax return, but you should keep it for your records in case your donation is questioned. , Keep a record of all donations you make during the year.
When you prepare your tax return, complete IRS Form 8283 and attach it to Form 1040 if the fair market value of non-cash donations exceeds $500.
About the Author
Sarah Vasquez
Enthusiastic about teaching home improvement techniques through clear, step-by-step guides.
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