Every year all around America almost every tax preparer asks the question, “Do you have charitable deductions like donations?” The answer is often, “Yes, $500 at Goodwill, Salvation Army and others.” That answer although widely accepted, is not defensible at audit. This is how you should think and act now around your charitable gifting.
Cash is Cash–that’s easy, never use cash! Write a check or use your credit card. Used Clothing is the biggest offender so below is a link to IRS publication 561. The long and the short of it is that the value of the items you bag and drop off are the prices they will put on the items when sold next week. Not a percentage of what you paid! They usually have a guide at any location as to their pricing on items, and you can pick that up and put it with your tax records along with the receipt that says, “One Bag of Clothes.”
BUT WAIT, I’m dropping off the clothes so it’s too late to price these drop offs…this isn’t easy!?!? ANSWER: before you take your items spread them out on a table, floor, bed and TAKE A PHOTO, with your phone! It take 30 seconds to spread those clothes you just took out of the closet on the bed and snap a photo seconds before you shove them all in the bag to go. After you’ve dropped them off and picked up the sheet you print the photo (emailed from you to you at work and hit print) then at tax time it’s a few seconds. There are 1,2,3,4,5,6 sweaters. 1,2,3,4,5 slacks and 1,2 belts. Sweaters are $24 and slacks are $12, belts are $7 on this sheet from Goodwill, that’s $218 deducted. It takes moments to do and that photo and the list in with your tax documents is 100% defendable!
Publication 561, Determining the Value of Donated Property
There are a few more items that all should be discussed before the holiday season ends that could save you in taxes, everything you are likely to spend.
Call our office for a 30 min review and we will make your season a little happier from a financial perspective anyway. Call 734-437-1888 or Email [email protected] today!