Smart TaxesSmart Taxes

De-clutter now to get a tax break

You have until Dec. 31 to go through your stuff and make a noncash tax-deductible donation. Here's how.

By Money Staff Dec 29, 2010 8:14PM

This post comes from Meg Favreau at partner blog Wise Bread.

 

If you've ever thought about moving during December, I have one contraction for you: Don't.

I was stupid enough to do so this year, taking the stress of hauling my belongings to a new apartment, finding a storage unit, and trying to remember how my bed frame fits together and adding it to an already busy schedule of shopping, baking and holiday parties.

 

There is, however, one great thing about moving during December: It forced me to go through my belongings and make a substantial goods donation to my local Goodwill store.

 

Since Goodwill is a registered 501(c)(3) charity organization, I can deduct the value of what I donated to them when I submit my taxes in April (er, did I say April? March. I'll definitely get them in by March this year).

 

If you're thinking of donating gently used clothing, furniture or other items before the end of 2010, here's what you need to know:

  • Make sure the charity you donate to is eligible. Not every thrift store is a registered 501(c)(3) organization. Before you donate your goods, call the store to make sure donations to them are indeed tax-deductible, and read more about qualified organizations on the IRS website.
  • Make a list of what you're donating. Just in case you fall under the watchful, auditing eye of the IRS, always keep a detailed list of what you've donated so you can back up any deduction claims.
  • Be reasonable in estimating the value of goods. When you're figuring out how much to claim as a deduction, you need to estimate what the IRS refers to as the "fair market value" of each item. For example, if you're donating a used pair of jeans that you bought for $40, their fair market value isn't going to be $40 -- more likely $3 to $10. If you need help estimating the fair market value of your goods, take a walk around a thrift store and see how items are priced.
  • Give useful items. Charities like Goodwill have to go through a lot of stuff, and it makes their job even more difficult if you bring in your broken printer and pass it off as working just because you want to claim it as a tax deduction. If something is broken and can't be repaired, don't give it to a charity to deal with.
  • Get a receipt. Always, always, always get a receipt from the charity you're donating to. You can't claim your deduction without it.
  • Fill out the appropriate IRS form. According to the IRS, "If your total deduction for all noncash contributions for the year is over $500, you must complete Section A of Form 8238" (.pdf file). If you are deducting one item that is worth more than $5,000, you must complete Section B of the same form.

So, take a day to clear out your closets, and make sure to get your donations in by Dec.  31. It'll help you have a happy new year with less tax -- and less clutter.

 

More from Wise Bread and MSN Money:

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