For many charitable taxpayers, donating household items like clothing, furniture or electronic items is a way to lighten the burden of both home clutter and tax strain. Items such as these are tax deductible, provided you attain a receipt. But not just any receipt. The receipt should contain a dated and signed description and condition of the goods donated .
In a recent case, a person donated $28,000 worth of goods from his parents’ home to a qualified charity, the Salvation Army. He obtained two blank tax receipts from them and claimed the appropriate deductions on his tax return that calendar year. He listed each item on the proper schedule and valued them according to the organization’s list on their website. However, the taxpayer failed to substantiate the items according to IRC Sec. 170(f)(8) and (11). Charitable taxpayers are required to prove the condition of donated goods or obtain an appraisal to support their value if they are greater than $500 in value. The Tax Court ruled in the case none of the deductions were allowable.
The lesson learned is to follow the rules on charitable giving to the fullest extent of the law. One way this taxpayer could have proved condition is to document each item in a clear photograph, along with the appropriate description, value and supporting valuation.
Our office is here to ensure your tax return is professionally prepared under the tax laws.
Without Proper Substantiation, No Charitable Deduction of Household Goods; No. 2014-20; Tax Action Bulletins; pg. 20; (2014).