20 Jan Avoiding red flags when you donate stuff to charity

 Q. My parents died and I’m thinking of donating everything they had to a charity. How do I properly value all their stuff so the correct deductions can be made on my tax return? I’m the executor and the only beneficiary.

A. We’re sorry to hear about your parents.

When it comes to donating their stuff, you should first determine who can take the deduction.

“If your parents had bequeathed the items to charity under their Wills, the deduction should be taken on their estate tax return,” said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park. “Otherwise, the personal property passes to you as the sole beneficiary and upon you donating the property to one or more qualified charitable organizations, you may take the deduction for charitable contribution on your personal income tax return.”

So when you’re looking for a worthy cause to bestow the donation upon, you must make sure it’s a “qualified exempt organization” per the Internal Revenue Service. A list of these charities can be found on the IRS web site.

Also, Romania said, charitable contributions are deductible only as an itemized deduction (IRS Form 1040, Schedule A), and for non-cash contributions to a qualified charity in excess of $500, you must also complete and attach IRS Form 8283.

She said generally, if the value of the property being donated and for which you wish to claim a deduction is greater than $5,000, or if the deduction for any one item is greater than $500, the deduction must be supported by a qualified appraiser’s report. Otherwise, the deduction is based on the fair market value of the property, which you must estimate.

“Fair market value may be based on the present sale price of comparable items, depending on the age and condition of the property and the similarity of the compared and donated items,” Romania said. “Generally the fair market value of ordinary household goods and clothing is substantially less than the original purchase price.”

She said some organizations, such as the Salvation Army and Goodwill, provide a donation value guide listing common items donated and the average value.

Mary Scrupski, a Robbinsville-based estate planning attorney, said you need to be precise with your records of the donation.

If you are donating household items or clothing, the items must be in “good used condition,” she said. In other words, you cannot donate that old sofa in the basement if no one would ever use it.

“If the amount you are donating to one organization is more than $250, you will need a written receipt itemizing the items and the values,” she said. “Even if the donation is less than $250, it is always a good idea to get an itemized written receipt.”

Scrupski said you can find some guidance with IRS Publication No. 561: Determining the Value of Donated Property.

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This story was first posted in January 2015.