Charitable Donation Tax Deductions: 2013 IRS Rules

So,  it is once again tax time and you have donated an item(s) to charity. Good for you! And since Uncle Sam keeps changing the guidelines for who needs a formal, written appraisal, I’m going to try and simplify the rules for you. All of this information can be found on the IRS website, by the way, if you want to read through there yourself. According to the IRS, no matter what items you donate to charity and want a tax deduction for, “if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal” See IRS publication 561.

For Household Goods and Clothing:

This is what most people donate to Goodwill or other charities. A few bags of clothing and some household goods. Be aware that you cannot take a tax deduction on household goods unless they are good condition or better, and if you want a deduction of $5000 or more, you are going to need an expert appraisal. Same rules apply for clothing, if you want more than $5000 in deductions (pricing based on what they sell the item for, not what you bought it for) you need an appraisal. A household good (or one item of clothing) that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal as well. For furs and valuable gowns, you will need a form 8283.

For Paintings, Antiques and other Objects of Art:

If it is over $5,000 total, you will need an appraisal. The IRS.gov website states that “The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser’s demonstrated knowledge of the donated property”. This means you need to have a professional appraiser working for you (such as whimsey appraisals). You are going to need a formal, written appraisal that is typed and bound in a legal document, not just something verbal or written on a piece of letterhead. We appraisers have a whole list of qualifications that have to be met by the report.  And you will need to fill out a Form 8283. For anything over $20,000 you are also going to need large, glossy photographs of the art work. For anything over $50,000 you must request a Statement of Value for that item from the IRS. You must request the statement before filing the tax return that reports the donation. You also must send:

  • A copy of a qualified appraisal of the item.
  • A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. Add $250 for each item in excess of three.
  • A completed Form 8283.
  • The location of the IRS territory that has examination responsibility for your return.  >> Also note that for artworks, you need to have an Appraiser that is specialized in that particular area or specialty (i.e. old masters, modern, bronzes etc.. ) because their opinion is given more weight than generalist appraisers. I suggest looking on the International Society of Appraisers website to find a specialist.

Also note that if you are claiming your own original work of art as a charity deduction, the only thing you can deduct is your out-of-pocket expenses, not what you think your item should be valued at.

Collections

Such as rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns etc… The IRS isn’t very specific here, only stating that you don’t need an appraisal if the collection is modest in value. If your collection has a great value, I would say it’s a good idea to have that appraised.

 

Gems and Jewelry:

Those items are so specialized that you will always need an appraisal copy for the IRS.  The appraisal should describe in detail, a whole bunch of things including: the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. The stone’s coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Sentimental personal value has no affect on the price but having history/ provenance from a famous person does help increase the value of the jewelry.

 

If you donate a car, boat or aircraft :

(yeah, I just have a few extra aircrafts that I need to donate, ha ha!) then you will need to determine the Fair Market Value. Which means basically it is a price which does not exceed the price listed for the item in a used vehicle pricing guide. Make sure you use an appraiser that specializes in pricing those items, and not a generalist. I know a lot about furniture, but could not even begin to guess a price estimate for an aircraft!

 

(Important to note that the appraisal needs to be done BEFORE you donate the item to charity AND once you get an appraisal there is a limited number of days you have to donate the item)

 

 

 

Fore more information, visit IRS.GOV or to find a specialized appraiser in your area, visit ISA-Appraisers.org

And for those Furniture, Art and Antiques appraisals, you can contact us at whimseyappraisals.com

 

 

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