How To Donate Clothes And Reduce Your Tax Bill

How To Donate Clothes And Reduce Your Tax Bill

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Cleaning out your closets can help you save money and there is no better time of year to do it than now. Do you know how to get credit on your tax return for bags of clothing, household goods and other items that you donate to charities such as Salvation Army or Goodwill? It is easy to learn how to donate clothes and reduce your tax bill. Keep this easy tax tip for year end top of mind this week because after Saturday you will have to wait a whole year to benefit from it again.

Clothing Donations To Charities
The rule of thumb for clothing is that if you have not looked for it or worn it in over a year, get rid of it. That could add it up to several bags full of items suitable for donation. It becomes a win win effort. You get rid of unused items in your home and can reduce your tax bill in the process while helping make your unwanted items available to others who could use them. Documenting your donations and assigning a value to them is an easy process.

When you drop off bags of clothes and household items to a charity, make sure they give you a form to fill out. The charity won't fill the form out for you except to date it and maybe sign it. Filling in the list of items and their value is up to you.

How To Figure The Value Of Donated Items
So how do you know what your donated items are worth? The IRS offers a rule of thumb that you should use the thrift store value or garage sale value. For example, let's say you donate a sweater. What would that sweater cost if you purchased it from a local thrift store? What would that sweater cost if you bought it in a garage sale? There is no exact answer to the question but this rule of thumb should help you narrow the value down to a reasonable range. If the item is is excellent condition you can go with the higher end of the range. Follow this process for each item you donated and itemize them on the blank form the charity provided you (you can attach your own separate piece of paper to the form for a longer list of items).

Cash Gifts To Charities
If you donate a few bucks each time they pass the plate at church, you don't need to get a letter proving it. Instead, just keep your own record of it with your other tax documents. For other cash donations under $250, a receipt or canceled check will often suffice for record keeping. Whenever a taxpayer makes charitable gifts of $250 or more a letter from the charity is required. The purpose of the letter is to acknowledge your donation, and it must say certain things by a certain date for the gift to be deductible. The IRS has established a track record of being strict about this with little flexibility. Even if someone made a million dollar donation and failed to get the acknowledgment letter before the cut off date, there is little chance that the IRS would bend.

Document Donations Right The First Time
The tax rules have no gray area. In order for charitable gifts of $250 and above to qualify for a deduction, there must be a letter detailing the amount of the donation and affirming that no goods or services were provided in connection with the gift.

About the Author:
Nathan Randall, editor, DailyDollar Newsletter provides free daily advice on money matters plus coupons and discount codes. FYI...you can now access the DailyDollar Newsletter via iTunes podcast, YouTube video, and on Facebook and Twitter too.



Article Originally Published On: http://www.articlesnatch.com


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