Q: At the end of every season I stuff a bag with clothes for my local thrift shop. I get a receipt for my taxes, but my husband always says I undervalue my donation. I disagree. Is there a better way to estimate the value of my donations?
More from TODAY.com
Teen asked to cover up at school dance felt 'embarrassed and ashamed'
“It was hard for me because that was a night I was supposed to feel really beautiful and special," she said. "This was rea...
- Crock-Pot, baked and more: Get your wings on for the Super Bowl!
- Meet the Puppy Bowl IX starting lineup before game day
- Holy home! Pennsylvania church gets flipped into a house
- Can Katy Perry top the greatest Super Bowl performances of all time?
- Teen asked to cover up at school dance felt 'embarrassed and ashamed'
A: You're among about 20 million Americans a year who make material donations to Goodwill or the Salvation Army or another thrift-shop organization, getting a receipt in return. It'd be great if that receipt listed the value of your donation, but as you know, most major charities don't do that. It's up to you to figure that out.
According to the IRS, you can deduct the "fair market value" — the price a buyer would be willing to pay for them — of the clothing, household items, used furniture, books, etc. that you give away. The IRS suggests you shop thrift stores or classified ads or auction sites like eBay to fashion a good guess. The Salvation Army Web site has a basic donation-valuation guide that's helpful.
But value also depends upon the condition of your items. A piece of clothing in good condition means it has no noticeable wear or tear. Fair condition means it looks slightly worn. And poor condition means it looks well-worn.
Brand also matters. Designer clothing that costs more in the stores is worth more as a deduction — so long as there's a label. A Calvin Klein suit worth a $260 deduction in good condition is worth $69 without the label.
If the merchandise you've donated is worth less than $500, you simply list the amount on your 1040's Schedule A. If you report donations worth more than $500, you have to fill out IRS form 8283. On this, you have to identify and value the items — noting when you bought them, approximately, and how much you paid for them, also approximately. For any item worth more than $250, you need a receipt from the charity. And for any single item worth more than $5000, it's necessary to get an independent appraisal.
I applaud you for making these donations; you get the tax deduction and these agencies that help the needy are able to profit from your generosity.
Jean Chatzky’s Bottom Line
This week: How to avoid identity theft
According to the Privacy Rights Clearinghouse, identity theft claims a half-million victims annually and costs financial institutions more than $5 billion. How does it happen?
Typically, someone gets hold of a credit card in your name and then makes purchases — or worse, takes out loans or mortgages, accruing tax bills — under your identity. They can get the necessary information by simply digging pre-approved credit solicitations out of your trash, then getting the card in your name at a new address.
Protect yourself by following these precautions:
- Tear up all pre-approved solicitations.
- Pay attention to your credit card billing cycles. If a credit card bill is a few days late, call the issuer and ask if there have been any inquiries or changes to your account.
- Carry only the credit card information you need for doing the transactions you are planning (i.e., not all of your credit cards and not your Social Security card.)
- And keep tabs on your Social Security number — don't put it on your checks or give it out any more than is absolutely necessary.
Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Copyright ©2004. For more information, go to her Web site, www.JeanChatzky.com.