I think one of the reasons these mid-January and February days are so dreary is that it’s also tax time. Your mailbox and even your email inbox these days are being graced with tax forms, reminding you that preparing your income taxes is looming over your head. One of the reasons I dread tax time is because I can no longer procrastinate getting my records organized, and in doing so, it inevitably adds a bunch more to-do’s to my list of things I’d rather not be doing in my free time.
One thing on my list is officially calculating the amounts of our drop-off donations to thrift shops. Rather than just putting down “3 bags of clothing” on the receipt handed to me when I make a drop off, I actually write down exactly what I’m donating so that I can maximize the deduction on our taxes. Now’s the time when I put a value on those lists and make it easy for our CPA to prepare our taxes. (Nope, I don’t do our taxes anymore – leaving that to someone who does it for a living these days.)
If you’re looking for an easy way to reduce the amount of taxes you pay, properly documenting your thrift store donations is it
If you’re looking for an easy way to reduce the amount of taxes you pay, properly documenting your thrift store donations is it. A men’s t-shirt is resold at Goodwill for $1-$6. Instead of “bag of men’s t-shirts, $50,” take the time to do the math.
If you go middle of the road here, even ten t-shirts can be a $30 write-off. How many t-shirts fit in a garbage bag? That’s way more than $50 worth.
Keep in mind that items donated must be in good condition. If you’re getting rid of it because it’s stained or torn, that’s not a donation. That’s pawning your trash on the charity. You can’t write that off.
Don’t write off writing things off
A lot of people think that you have to have a mortgage in order to take advantage of charitable deductions on your tax return, but that’s not always the case. It’s true that in order for the deduction to matter, the total of your itemized deductions (most common are mortgage interest, taxes and charitable donations) needs to exceed $6,300 for single people and $12,600 for married for the 2015 tax year, but people often don’t realize that their state income taxes count as a deduction.
Higher income earners may reach this amount, so it’s worth checking your last pay statement from 2015 to see if your state tax withholdings were getting close to the standard deduction amount. A few trips to Goodwill that you thought didn’t really matter very well could get you a deduction higher than the standard. Make sure you also go back through your deleted emails and save those, “Thanks for donating,” messages from your friends and family’s charitable fundraisers. Every $20 counts!
Hopefully it’s not too late to go back and itemize the things you donated this year. I often recommend the free It’s Deductible tool, which makes it easy to track the value of your donations, and you can just print the list and give it to your tax preparer for your return. Keep in mind that documentation requirements become a bit stricter the more non-cash deductions you’re claiming. Here is a summary of what information you need to maintain in order to comply with the tax rules:
For items totaling less than $250 given to one organization, all that’s required is a receipt with the name of the organization, date and location, and a reasonably detailed description. A letter works or if you’re dropping off at one of those un-staffed boxes in a parking lot, simply put a note with the above details in your tax files.
To deduct items valued at least $250 but less than $500, you must have the above PLUS:
- A written description of the items (an Excel spreadsheet works)
- Written acknowledgement from the charity that you did not receive goods or services in return for the donation (This is usually on the receipt, but if not, get it. The IRS is a stickler for this!)
- Description and good faith estimate of the value of any services you DID receive (For example, if you donate an item to a silent auction and receive a ticket to the event in return, the value of the ticket lowers your total donation value.)
If your donations to one organization total at least $500 but less than $5,000, you must state all of the above PLUS:
- How you acquired the goods (usually via purchase or gift)
- The approximate date you acquired the property
- What you paid for the property (give it your best estimate for clothing and household goods)
Finally, if you’re giving something valued at more than $5,000, you’ll also need a qualified written appraisal to attach to your tax return justifying the high amount.
Generally speaking, it’s a good idea to keep track of all of the above information, just in case. And be reasonable with the value you assign to goods. Even though I thought the designer jeans I finally gave up on should still be worth the unmentionable price I paid for them in 2008, Goodwill is still probably only going to sell them for less than $20, so that’s all I can claim. A good rule of thumb for most used goods is 25% of the value you paid for the item.