How to Record Initial Value for Charitable Donations

Tax deductions for donated property are based upon the fair value of the goods given to a charitable organization.

Various charitable organizations such as churches, thrift stores, nonprofits, schools and foundations are eligible to accept tax-deductible contributions. These come in many forms, including donated property, charitable dinner functions and other types of fundraisers. Internal Revenue Service-approved tax-exempt entities will ordinarily provide substantiation such as receipts and documentation for contributing to their organization.

Instructions

1. Estimate the fair market value of donated property. The IRS has different reporting and record-keeping requirements based on the value of donated property. Items less than $250 must have the name of the charity, the date of donation and a detailed description of the property. Donations up to $500 also require a written acknowledgment from the organization. Contributions up to $5,000 will also require details on how and when the property was acquired. For donations in excess of $5,000, in additional to the previous requirements, a written appraisal must also be obtained from a qualified appraiser.

2. Estimate the excess paid for a charitable dinner above its fair value. Charitable functions often will provide the donor with some sort of benefit to facilitate the contribution. A prime example of this is a charity dinner, for which donors purchase tickets in excess of the true value of the dinner. For instance, a fundraiser held at a hotel ballroom for $100 per plate may stipulate that $25 of the ticket price covers the meal, and the remainder represents the value of the charitable contribution to the organization.

3. Maintain substantiation and records for charitable contributions. To promote accuracy and completeness and to discourage abuse, the IRS requires substantiation and record-keeping for charitable contributions. The format of these receipts may vary depending on the organization, but the taxpayer has a parallel obligation to create and retain his own records of donations made throughout the year.

4. Itemize deductions to claim charitable donations. To claim tax deductions for charitable contributions, taxpayers must elect to itemize their deductions on Schedule A of their personal tax return. If a taxpayer does not itemize deductions, but instead takes the standard deduction, there is no mechanism for deducting those charitable contributions.

References

• IRS.gov: Charitable Organizations -- Substantiating Non-cash Contributions
• IRS Publication 526: Charitable Contributions

Resources

• IRS Schedule A: Itemized Deductions