Donating goods is a great way to pass on items to those who can use them, and at the same time earn yourself a tax deduction. However, you need to actually keep track of what you drop off so that you can get a tax deduction. In an audit, if you do not have proper documentation you will not get to keep that deduction.
So How do You Keep Track of Your Contributions?
I use two methods depending on how much time I have when I am making the donation.
- Take pictures with your phone – then write those items down on the receipt when you do have time. This is what I do when I am pressed for time and just want the item out of the house. (The picture above is one example.)
- Use this Charity donation list to write the item and condition. I use this list when I have a bit more time or am actively cleaning a closet. When the item comes out and in the box it is immediately written down. I personally like this as it is a clean way to track items donated. (Afraid you are going to lose the information before tax time? Here is a post on how to organize money information!)
How to Know the Value for Tax Deduction
Once you hit tax time you need to know the real value of the donated item. Most organizations that allow you to donate goods to them, will also have a handy guide to knowing the value of such items. Select one of the organizations website’s and download their value list. (Here is the link to Goodwill’s list.)
If you are using the downloadable form from above, I have included a space for the value. If you went with the picture and write on the receipt approach, just add the value next to the item and total.
Things to Keep in Mind for Tax Purposes
- Items need to be in good condition to qualify for a deduction.
- If your items value more than $500 you will need an extra form at tax time.
- If you are donating one item worth more than $5,000 you need to have an appraisal. (This is also the time I would check with my CPA to make sure I am getting it right – better safe than sorry.)
- Deductions are only good if you itemize.
- If you want more specific you can head to the IRS, or call your CPA.