Tax Credit Values of Donated Items
Tax credit values are based on the fair market value of the item or property donated. Using past or potential future values is not allowable under Internal Revenue Service regulations. Fair market value is determined by the actual price a consumer would pay for an item on the open market. Valuation of donated items cannot be influenced by either seller restrictions or incentives that artificially add to or reduce the market value.
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Valuation Factors
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Factors used to determine the value of donated property include the actual price an item would sell for, price comparable items have sold for, actual replacement cost and the value determined by an official appraisal. When considering the actual selling price of an item, ensure there were no prearranged agreements to sell or purchase the property when the price would be artificially increased or decreased by unusual market conditions. Replacement cost determination must be for an item that is of equal quality and quantity.
Used Value
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Used household goods and clothing usually have a much lower value than when the items were originally purchased. Taxpayers are not allowed to take a deduction for used household goods and clothing unless the items are in "good used condition or better." Taxpayers claiming a donated value of $500 or more for household goods and clothing must support the claim with an appraisal from a certified appraiser.
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Jewelry and Antiques
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Claims for jewelry should always be supported by an official appraisal. Fluctuation of values associated with precious metals and gems make it imperative to determine the actual market value of jewelry and gems on the date of donation. Taxpayers may claim the donated value of antiques, oil paintings and other valuable objects without an appraisal if the value claimed is less than $5,000. Claimed values for artwork of $20,000 or more requires the taxpayer to provide additional evidence of the value.
Other Property
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Fair market value for vehicles is based on the sale value of the vehicle when sold to a private party, not retail prices on a dealer's lot. Fair market value of motor vehicles will be significantly reduced for major defects or when not in operational condition. Real estate values must be supported by an appraisal. Real estate values are established by comparison to neighboring property, uniqueness and commercial value. Special rules apply to property with historical value or when donating partial interest in real property.
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