How to Determine the Value of a Clothing Donation for Tax Deduction

An article of clothing given to charity can be tax deductible.

The IRS allows taxpayers to deduct charitable clothing donations from taxes owed. There are specific rules and limitations regarding these deductions. Failure to adhere to these rules can result in the deduction being disallowed. It takes a careful comparison of several tax valuation guides and a realistic view of the actual value of the items being donated. The IRS does not care that the clothing you are donating belonged to your deceased grandfather, parent or loved one. There is no monetary value on sentiment. The IRS does not care who made the clothing. There is no deduction for fashion.

Things You'll Need

• Several Tax Valuation Guides for Donated Goods
• IRS Publication 561
• Receipts for Purchased Items (if available)
• Receipts for Donated Items
• Itemized List of Donations

Instructions

1. Gather receipts for each clothing item donated. If the receipt for the original purchase is available, use that, if not, it isn't essential. Also gather receipts given by the organization to which the clothing was donated. Typically, the charitable organization allows the donor to estimate the value of their donations, so they provide a blank receipt. These receipts from the charitable organization are not necessary for the tax preparer, although some will ask for them. These receipts are specifically for attaching to tax returns in case the IRS audits the return.

2. Read through charity valuation guides for legitimate clothing-deduction ranges. Clothing donated must be in good condition. Items in 'fair' condition are no longer acceptable. Whether one uses the guide from The Salvation Army, Goodwill Industries or another charitable organization doesn't matter. What matters is that a taxpayer is able to justify the amount claimed for the deduction; the IRS will accept an evaluation based on the valuation guides of these charities.

   Some of these guides separate clothing values into men's, women's and children's categories with further designations for shirts, dresses, sweaters and skirts.

3. Calculate the Fair Market Value of each item donated. The IRS determines the Fair Market Value as the amount you might pay in a thrift or consignment shop. In a thrift shop, the brand of clothing doesn't matter; a high-end shirt will be sold for the same amount as a shirt purchased originally from Wal-Mart. The value guides have a high value limit and the IRS will not allow a deduction beyond that unless there are specific circumstances. If, for example, a valuable fur coat is donated, the taxpayer will have to file a Form 8283 if the value of the deduction is greater than $500.

Tips & Warnings

• Purchase software for valuing donated items. Programs such as "It's Deductible" are usually found at office supply stores. The advantage of purchasing this software is that the software can be updated online to reflect changes in IRS policy. The software asks for the type of item, the date of its purchase and a user's evaluation as to its condition. As each item is donated throughout the year and added into this file, the software will calculate the amount that can be deducted. Using the software, however, does not eliminate the need for the taxpayer to keep the receipts received from the charity.

References

• Internal Revenue Service: Publication 561 — Determining the Value of Donated Property
• Goodwill Industries Industries, Inc.: Donation Valuation Guide
• The Salvation Army: Valuation Guide for Salvation Army Donations
• Bankrate.com: Tax Valuation Guide for Donated Goods
• Internal Revenue Service: Form 8283 — Noncash Charitable Contributions