Quality Giving

It's always a good idea to help out charities by donating cash or things they can use or sell to raise cash. However, it really goes against the charitable spirit to use the Goodwill or Salvation Army drop-off spot as a place to take your worthless garbage. Many of these charities end up having to pay a fortune in hauling and dump fees to get rid of crap that is unusable and unsalable.

This brings up the issue of how much you can deduct for used things donated to charities. When I was answering questions on the AskMe.com site (now out of operation), there were several from people asking which they should do: sell their car for $1,000 or donate it to a charity and claim the $2,500 Blue Book value on their tax returns. I had to burst their bubble and explain that if the car could only be sold for $1,000, that is the value that can be claimed on your Form 8283, which is attached to your 1040.

People were totally unclear on their terms. They would claim that something was worth $1,000; yet they could only sell it for $300. I had to point out that they were contradicting themselves. An item is only worth what an unrelated party would be willing to pay for it. Guides such as the famous Kelley Blue Book are just that, guides. If you check out their valuation techniques, which you can do online nowadays, they base their valuations on all kinds of things beyond one flat amount for everyone. Such things as accessories, condition, and the number of miles are all important aspects in determining a realistic market value, which is what has to be used for tax deductions. It shouldn't be any higher than what you could sell the car for through a classified ad.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 12/03/2002 07:52:00 PM Send this post: