Rules for Noncash Charitable Deductions

Over the years the rules on giving have tightened.  If you want to claim itemized deductions for noncash charitable donations on you 2014 Form 1040, brace yourself.

Because unscrupulous taxpayers once made a habit of claiming bogus and inflated charitable write-offs, the federal government has tightened up over the years.  Unfortunately, innocent taxpayers are penalized as a result.  Below is a quick summary of the rules that apply to the most-common types of noncash charitable donations:

1. For a donation of a noncash item worth less than $250, you need a receipt from the charity.  You must have the receipt in hand by the time you file your return, however, don’t file it with your return.
2. TO deduct a donated noncash item worth $250 to $5,000, you need a contemporaneous written acknowledgement from the charity that meets IRS guidelines. 
3. To deduct a donated noncash item worth $501 to $5,000, you need the written acknowledgement plus written evidence that supports the time’s acquisition date, its fair market value, how much it cost, etc.  Fill out this in formation on IRS Form 8283 and keep the written evidence with your tax records.
4. For donated clothing and household items, the general rule says you can only claim deductions for stuff that is in “good condition or better.” However, you can deduct the fair market value of an item that’s not in good condition or better if you attach a written qualified appraisal that values the item at more than $500.
5. For a noncash item worth over $5,000, you generally need what is listed in Rules 2 and 3 plus a written qualified appraisal.
6. Special restrictions apply to donations of vehicles, planes, and boats. The most important thing to know is that your charitable write-off will usually be limited to the amount of sales proceeds when the charity sells the vehicle, plane or boat.

See Bill Bischoff, 7 Tax Rules That Apply to Noncash Charitable Donations, Morningstar, Feb. 16, 2015.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.