Maximizing Your Giving: Who you should give to, what you should give, and why
Part Two - Donating Your Stuff the Right Way
Donating your possessions to a charitable organization is a win win idea.
- The organization gets items they need free.
- You get rid of unwanted but still useful stuff.
- You reduce clutter around the house without all the work of a yard sale or online sales.
- You may be entitled to a tax deduction which gets you a larger tax refund.
Another reason to donate your stuff to a charitable organization is over looked by many people: it is a good test to see if the company is worthy of your cash donation. An organization that treats you well and makes good use of donated items probably manages cash extremely well. How do you know if the organization is using your donated goods wisely? Look for tell tale signs that the company is organized and well managed such as receipts for gifts, thank you notes, online list of needed items, acknowledgement of what goods will be used for, and the general helpfulness of staff. When you donate items the staff should be looking for opportunities to increase your awareness of the organizations mission and programs. Did they ask questions regarding how you came to know about them? Did they ask if you want to receive the companies’ newsletter or tell you more about what they do? You should walk away from the encounter with more knowledge about the organization, feeling valued but not pressured into giving more.
What kinds of items should you give to charitable organizations?
The most important rule is: Don’t give garbage. Make sure the goods you want to donate are usable, in good condition, and relevant to the organizations needs. When you donate unwanted or unusable items you cost the organization money by wasting staff time and creating greater waste disposal expenses. For example: One organization desperately needed a new computer, which a donor called and said she would like to donate. It was on the way home for the Executive Director to pick it up, so he made arrangements to do so. Upon arriving he discovered a ten year old computer (worthless) and was also given a box of ancient software, a printer which contained a mouse nest, and a computer desk which had housed several ‘varmints’. The Executive Director was also expected to help this lady clean out the corner of the garage where all this equipment had been stored. He arrived home late for dinner and very dirty. The next day all this equipment was taken to the organizations office. Staff spent more time trying to find useful homes and cleaning the items. In the end most of the items were disposed of and over 15 hours of the organizations time was used. Unfortunately, this is not an uncommon story.
To find a suitable home for the items you want to donate check the potential organizations web site for a list of needed items or call the organizations office. Some organizations list needs in their newsletters. Many companies offer pick up, but remember that this service costs them money while saving you time. So, try to drop off items whenever you are able.
Who can you give to and take a tax deduction?
You can donate items to anyone, but there are IRS rules for who you can donate to if you want to take a tax deduction. You cannot deduct gifts of goods to individuals, political organizations, or candidates, civic leagues, social and sports clubs, labor unions, and chamber of commerce, or foreign organizations (with a few exceptions). You can deduct gifts given to most nonprofit organizations, including: Salvation Army, Goodwill, Red Cross, United Way, churches, nonprofit schools and hospitals, public parks and recreation depts., Boy Scouts, Girl Scouts, Boys and Girls Clubs of America, and war veterans groups. If you are unsure as to whether or not the organization qualifies ask a member of the staff.
What can you deduct?
You can deduct the fair market value of any goods that are in clean and usable condition. Fair market value is what you could have sold the items for, and what a potential buyer would willingly pay for that item. If the item is new you can use the price on the receipt from the store at which it was purchased. The Salvation Army website has a list of recommended prices for tax deductions. Note that you cannot deduct the value of blood given to blood banks, the value of your time or services, cost of raffle, bingo or lottery tickets. Another interesting twist is that if your receive anything in return for your donated items; you may only deduct the difference in value. For example: if you donate a computer valued at $500 but receive a $15 book in return for your donation you should only take a $485 tax deduction.
How do you take the deduction?
If you regularly file Federal income tax Form 1040EZ you do not need to keep records of your donations. There is a standard deduction already factored in. To receive a tax deduction you must itemize your taxes using Form 1040. You will want to save receipts which should include the organization name, date, and value of the donation. These receipts are required for donations which total more than $250. You do not have to turn them in with your taxes, but should save them in case you are ever audited. If your donations total over $500 you will need to fill out form 8283. Your accountant should help you with larger donations because the rules get more complicated. For example: donations that total over $5,000 require you to fill out section B of form 8283 with a written appraisal of the items and gifts of cars have even more rules. Maximizing the charitable contribution deduction when donating tangible personal property.: An article from: The Tax Adviser is a great help if you need more information about tax deductions.
Whether you take a tax deduction or not, donating your stuff to charitable organizations is good for everyone. This is a wonderful way to give when you are cash poor. If you have items you are not using give them to someone who can use them. This kind of giving always comes back to you and it makes you feel great about yourself!
What have you given that really helped someone else out? Leave a comment to encourage the rest of us to continue to do our best to make the world a better place!