Hey Dave,
Could you advise on how the value of items is determined for charitable contributions? I am about to donate several of my designer suits to charity.
Lara
Lara,
As a general rule, you would use the fair market value of the items. Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
Since the rules and guidelines vary by property type, your best bet would be to review the section titled Determining Fair Market Value in IRS Publication 526.
The IRS frequently questions deductions for items that appear to be overvalued, which is why we strongly recommend that you document your valuations with photographs, detailed lists of the specific items you donated, canceled checks, receipts from your purchase of the items, or other evidence, such as website information or magazine articles.
Some versions of TurboTax include the “It’s Deductible” feature, and there is also an “It’s Deductible” app that helps with charitable contribution valuations. Both Goodwill and the Salvation Army also have valuation estimates on their websites for common items such as clothing and household appliances.
The important thing is to keep your value estimates reasonable. Even if you are addicted to designer suits, they generally have very little fair market value in the thrift store market.
Deductibly Yours,
Dave