Tax benefits from donations

Donating property Thinking about making a year-end charitable contribution? If so, keep in mind that tax-deductible donations are not limited to cash. According to the Minnesota Society of CPAs, many organizations accept gifts of used cars, computers, clothes, art and other types of tangible property. In return, taxpayers who itemize may qualify for a valuable tax deduction. Generally, when you contribute property to a qualified charitable organization, you can deduct the fair market value of the property at the time of the contribution. According to the IRS, the fair market value is the price a willing buyer would pay a willing seller, when neither is compelled to buy or sell, and both have reasonable knowledge of all the relevant facts. However, special rules apply to some types of property. Here is an overview of the rules governing the most common types of non-cash contributions. Donating a computer When you donate computer equipment, the organization accepting the donation should provide you with a receipt specifying the equipment you donated and the date of your donation. It is up to you to determine the value of your donated computer. In arriving at a figure, keep in mind that the market value of computers falls quickly. Classified newspaper ads may help in establishing the value of your donated property. Before donating your computer, erase all personal files and overwrite the data on your hard drive. You want to give away your equipment – not your data.   Donating a car In general, if you contribute a car to a charitable organization, you can claim a deduction for the fair market value, which takes into account not only the year, the model, and the mileage of the vehicle, but also the vehicle’s condition and local market variations. As a result, the fair market value of a taxpayer’s car or other vehicle may be lower than the average price listed in used vehicle guides, or “blue books” as they are often called.   Donating used clothing and household goods When donating clothes and household goods, it is your responsibility to assign a fair market value to your donations and obtain a receipt from the recipient organization. For help in valuing used clothing, you might visit a used clothing store or thrift shop. For household goods, you can look in the classified newspaper sections for similar items being sold. Like used computers, the fair market value of used clothes and household goods is far less than the price paid to acquire them.