20 Mar 2023 Noncash Charitable Contributions
Authored by Haynie & Company Partner Bernard Abercrombie, CPA
During this busy tax season, we see several items presented to us by clients that require us to explain how something needs to be handled or what we need more information on. One of those that frequently comes up is noncash charitable contributions.
It is common for us to review the data provided by a client and find a receipt for several noncash contributions for household-type donations from a charity like Goodwill with either no additional information or a description of what was donated but no value placed on what was contributed. There are three important dollar thresholds for noncash contributions we will cover.
Noncash Contributions less than $500
The first is total noncash contributions valued at $500 or less. Noncash contributions of $500 or less are reported directly on the Itemized Deduction Schedule A and do not require significant detail. If the total exceeds $500, they are individually reported on Form 8283. The information required on the form is the date of each contribution, the date the items were acquired, how they were acquired, the original cost, the method used to value them, and most importantly, the value at the time of the gift.
Noncash Contributions over $500 up to $5,000
Next is noncash contributions over $500 up to $5,000. For those noncash contributions that total $5,000 or less, the information mentioned needs to be reported for each contribution.
Noncash Contributions over $5,000
When our clients often move, remodel, or decide to do some spring cleaning, they provide us with values in excess of $5,000, and that’s where it gets tricky. A donation of similar items over $5,000 in a year must have a valuation by a qualified appraiser, and Form 8283 must be signed by the appraiser and included with the tax return filing.
A notable exception to this that we see frequently and is a valuable tax strategy is the contribution of publicly traded securities. So the question becomes, what are similar items? The IRS says: Similar property items are of the same general category or type, such as coin collections, paintings, books, clothing, jewelry, non-publicly traded stock, land, or buildings.
When maximizing the deduction for a client without an appraisal, we look at having the taxpayer identify separate categories like clothing, household items, furniture, electronics, collectibles, computer equipment, tools, etc.
The next thing is how to come up with a value. Many of our clients use an online program called ItsDeductible from intuit, which can provide comfort in establishing those values.
As one would expect, there are a number of special rules for donations for things like cars, property used in businesses, art, etc. These special rules are beyond the scope of this article. It is important to note that the tax benefits of donating noncash items may vary depending on the donor’s individual tax situation. For this reason, we recommend consulting with a tax advisor. At Haynie, we are ready to help answer any questions you have.
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