Already thinking of ways to boost your next tax refund? The answer may be lying in your closet. Spring inspires us to declutter and start anew. Going through belongings your closets, garage, and storage, and passing unwanted items along to charities as donations is one of the most mutually beneficial tax deductions. Ready to reduce untidiness and maximize savings? We have the spring cleaning tips below.
Clothing is the most common and no-brainer item to donate, and often in high demand. Remember to keep track of what you throw out of your closet and into the donation box. You’ll want to record the fair market value. Not sure how to determine the FMV of your clothes? There are online tools to help. If you want to estimate yourself, use the average price the item would sell for at a thrift or consignment store.
Just like clothing, household items such as kitchen appliances and furniture are widely accepted at charities to help families that have lost homes or need assistance resettling into a new home. Now is a good time to evaluate what you don’t need or use around your home. You can donate it to a charity. Calculate fair market value in the same way as clothing.
Donating jewelry and other high value items requires an additional step. Before taking it to a charity or thrift store, be sure the jewelry is appraised by an expert. If you’re donating jewelry to an organization, the IRS may deduct the items differently. This depends on how you use the items. Consult your tax professional for more details.
Taking a used car or boat off of your hands will clear up a lot of space in your garage or on your property. And it can be extremely useful to a charity. Similar to jewelry, the deductible amount depends on how the car or boat is utilized. If the charity sells the car or boat for more than $500, here’s what to do. Deduct the smaller of either the sale amount or the fair market value at the time of donation.
These may not clutter your home, but you can donate them come tax time. Plus, you’ll know longer need to think about them financially! When you donate appreciated stock, you can avoid capital gains tax. You’ll calculate the fair market value at the time of donation, not purchase.
Ready to tidy up? Make sure you donate to an IRS-approved charity and always get a receipt for your records, especially in case you are audited. If an item donated is worth more than $250, you must also obtain a written record. Meanwhile, items over $5,000 must be appraised. Take advantage of the season’s call for a spring cleaning, and prepare for feel-good savings.