How to Determine the Fair Market Value of Personal Property
Your trash can truly be a treasure to someone who is less fortunate. By donating personal property you no longer want or need, you have the ability to turn your excess into gems. You will also be financially rewarded. The IRS allows you to claim the full "fair market value" of your donated personal property on your tax return. Here are a few ways to determine the fair market value of your newfound treasure.
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Instructions
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Visit the IRS website and download Publication 561 (see Resources below). Publication 561 provides detailed information on the guidelines, itemization and value of personal property.
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Compare pricing. Once you have read Publication 561, do a little research to determine what item(s), similar to yours, actually sells for (this will let you know if you are recording prices that are too little or too much). The Salvation Army provides an itemized list, online, if you will be donating clothes, dry goods, furniture and sporting goods (see Resources below).
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Determine if your chosen charity is a 501(c) 3 organization. Charities that are 501(c) 3 organizations are registered with the IRS. This kind of organization is the only kind of charity eligible to provide a tax deduction for the personal property you will be donating. Every charity registered as a 501(c)3 organization is also registered with the Better Business Bureau (see Resources below).
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Get an itemized receipt from the charity. In the event you are audited, you should always get an itemized receipt from the charitable organization to keep with your tax records. Ensure the receipt has the name of the charity and, if applicable, the stamp or seal of the charity.
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Include an IRS Form 8283. If you have donated over $500 of your personal property to a charitable organization, you need to have an IRS Form 8283 attached to your tax return (see Resources below).
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Tips & Warnings
If you will be donating property worth more than $5,000, the property has to be appraised. If you will be donating a lot of personal property to a charity, you may want to consult and attorney or CPA.
Ensure your chosen charity meets the "related use rule"--the personal property you donate must be in direct correlation with the mission of the charity; if not, you will be unable to claim full market value for your property on your taxes.
