Fair Market Values for Clothing Donations for IRS Deductions
When you donate clothing to charity, you're allowed to take a tax deduction. The IRS limits the deduction to the "fair market value" of the clothing. The IRS itself does not calculate the fair market value of donated clothing; it only offers guidance. It's up to you to determine the deductible value -- and to defend that value if it's questioned by the IRS.
Other People Are Reading
-
Definition
-
For all donated property, including clothing, the IRS defines fair market value as the price the property would fetch if you sold it on the open market to a buyer who had full knowledge of the quality and condition of the material. If you put any conditions on the use of the donated clothing, then you must adjust the market value accordingly. If you donated, for example, work clothing with your company logo and insisted that the clothes couldn't be used by anyone doing work outdoors, the deductible fair market value would be lower.
Factors
-
The IRS says there are no fixed formulas or methods for determining the fair market value of donated clothing. Factors to consider include the age of the clothing, how worn it is, whether it's in or out of style and how readily it can be used. Further, the fair market value is the price the clothing would get in the present day and in its current condition; it's not the price you paid for the clothing when it was new. In most cases, the IRS says, donated clothing is worth far less than what you paid when it was brand new. Finally, the clothing must be in "good used condition or better," or you cannot take any deduction for it.
-
Recommendation
-
The one suggestion the IRS makes is to look for similar items at used clothing stores, thrift stores and consignment shops. The prices paid by buyers there are a good indicator of the value of the clothing, and you can use them if the IRS questions your deduction.
Appraisals
-
If you claim a deduction for more than $5,000 for any item of clothing, you must include with your return a report from a qualified appraiser stating the specific value of the item. In addition, tax law makes an exception for used clothing that's in bad condition but that has exceptional value -- because it is rare, for example, or has a connection to a famous person. If you deduct more than $500 for such an item, you also must include an appraiser's report. The IRS makes the final determination as to whether appraisal reports are acceptable.
Form 8283
-
If you claim a total of more than $500 in non-cash charitable contributions -- including donated clothing -- you must file IRS Form 8283 with your tax return. On one side of the form, identify individual contributions of less than $5,000. On the other, list contributions of over $5,000.
-
References
- Photo Credit Comstock/Comstock/Getty Images
