Valuing Donations at Tax Time

2011 has come and gone, but the filing of 2011 taxes remains.  As a former CPA,  I really don’t mind filing my taxes, especially because my CPA brother-in-law takes care of the filing and all I have to do is gather the information for him.

What I do mind is valuing the donations of goods that we make to our local thrift store throughout the year.  For some reason, this is one of my most dreaded tasks and I generally procrastinate around completing it until the last minute.  Valuing these items is important though, because we often end up donating thousands of dollars worth of items each year, which translates to hundreds of dollars in tax savings.  Some of my clients may end up donating tens of thousands of dollars worth of goods during a large downsizing engagement.  In these cases, donations can result in fairly significant tax savings.

This year, I vowed things would be different and I gave some thought to what caused me to procrastinate around this. I concluded that it’s because I often wonder if I am valuing my items accurately.  Specifically, I have been using a 2007 version of a valuation book for years and for the past couple of years have been wondering how much more I could be claiming for items donated if I used something more current   This year I decided to do a little research in hopes of finding something more current that would yield increased deductions.

I identified and explored four different options for valuing donations.

First the free options:

The Salvation Army Valuation Guide  lists high and low values for common categories of items that you might donate, such as various types of clothing, household goods, appliances, furniture and a few other miscellaneous items.  The whole list covers only about 140 different items.

Goodwill’s online guide  is much more limited, providing suggested values for only 65 or so items. I can’t help but be curious why they would even choose to offer such a limited list.

Turbo Tax offers a free online version of It’s Deductible  that can be used to value your donations.  Positives of this online service include:

  • 22 different categories of donation items to choose from, many with up to 20 subcategories, resulting in thousands of items and values for both “good” and “better” conditions of items.
  • Decent guidance on how to assess the condition of the items you are valuing, as the IRS only allows deductions for items in “good” used condition or “better” used condition.
  • Access to a “Live Community” forum for getting questions answered.
  • An estimate tracker in the corner of the screen which allows you to watch your charitable contribution deduction add up as you enter in items.
  • The ability to track donations throughout the year by entering in information as you make the donations and saving information throughout the year in your online account.

The downside of this program is lack of ease in determining valuations.  You can choose to value items in one of two ways.  The first is by selecting a category, and then typing in the name of what you’re donating.   The example listed on the site is for valuing a Sony Television, so it has you select the category of “Home Audio & Video” and then type in “Sony television.”  What I noticed though is that the same results are displayed whether you type in Sony or Vizeo or Pioneer,  so why would Turbo Tax lead users to believe that brand name matters?  The second method of valuing an item is by browsing the many categories and subcategories, which I found too time consuming.

While there is a LOT of information available at this site, I found the information too cumbersome to obtain.  If what I typed in didn’t exactly match an item in their database, it provided me with zero results.    I also noticed the program would get hung up at times and would only respond upon refreshing my screen.  Finally, I did not appreciate having to set up an account with user name, password, etc and then enter in the name of the charity AND the date of the donation just to access the information I was looking for.

After looking at what was available for free online, I ended up ordering the 2011 version of the valuation book I had used in the past.  It’s titled Money for Your Used Clothing, and in my opinion is worth every dollar of the $25 the publisher is charging.  Per the Money for your Used Clothing site, “MONEY – For Your Used Clothing” provides the taxpayer with certified valuations for over 1,200 clothing and household items commonly donated to charity – and all in accordance with the New IRS guidelines. If you itemize your deductions on your annual income tax return, you will save hundreds of dollars by using this book! This book explains six simple steps for documenting donations and tells how to receive a tax windfall without waiting to file a tax return.”  

What I appreciate most about this booklet is how easy it is to use.  Its 84 pages are  full of information on what to donate, who to donate it to and how to document your donation, in addition to the valuation information.  I also appreciate the completeness of the categories in this book.  The book itself includes 21 different categories of deductible items, seven of those being clothing related.  The women’s clothing alone includes over 110 individual items.   The book also offers an “audit protection guarantee” with respect to valuations.  Once I received it, I sat down with my lists of donated items and assigned values.  The whole process took about an hour and I ended up with thousands of dollars in donations, the tax savings from which more than paid for the book.

I’m curious how you value your charitable contributions.  What other options are out there?

 

 

 

 

 

 

 

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