If you itemize your deductions on your tax return this year, you may want to take advantage of any charitable contributions you made in 2014. While cash contributions are usually deductible in the amount of the contribution (as long as you didn’t receive any benefits from your contribution other than intangible benefits), the rules for non-cash contributions are different. Here are some of the rules that apply for non-cash contributions to charitable organizations:
If you donate a non-cash item worth less than $250, you need to obtain a receipt from the charity, and you must have it hand hand by the time you file your return, although you don’t need to file the receipt as part of your return.
If the item is worth $250 – $5,000, you will need a contemporaneous written acknowledgement from the charity, and it has to meet specific IRS guidelines. Check with the charity to ensure that they are in compliance with this requirement.
If the item is worth $501 – $5,000, you will need the above mentioned written acknowledgement, PLUS some written evidence to show the item’s acquisition date, the fair market value of the item, and how much it cost. You will use this information to complete IRS Form 8283. You should keep the written evidence for your records, but do not file it with your tax return.
If an item donated is worth more than $5,000, you will usually need the evidence from the two rules above, plus a qualified written appraisal. The information required for the appraisal varies depending on the type of property donated. There is no need for an appraisal if the property is a publicly traded security.
For household items, you generally are only allowed to take a deduction for donated items that are in “good condition or better”. However, if an item is not in good condition, you can deduct the fair market value if you attach a qualified appraisal that shows the value of the item to be more than $500.
If your total non-cash contributions for the year exceed $500, you will need to complete IRS Form 8283 and include it with your return when you file.
There are special rules that apply to donations of vehicles, planes, and boats. Generally, the charitable deduction will be limited to the amount that the charity is able to sell the donated item for.
For more complete rules regarding charitable deductions for non-cash items, see IRS Publication 526 (Charitable Contributions) and Form 8283.
Reference: Bill Bischoff, 7 Tax Rules That Apply to Noncash Charitable Donations, Morningstar, Feb. 16, 2015.