Donating Your Property: How the New Tax Law Affects You
Donating property to charity can be an excellent way to receive a tax deduction and enjoy the satisfaction of helping a worthy cause.
New tax laws went into effect January 1, 2005 primarily intended to close "loop holes" that were previously allowing some donors to claim unfair or inflated values for the property that they were donating to charity.
These new laws are not directed at or intended to penalize charities or the agents who process donated property for legitimate charities. They are definitely not intended to discourage property donations to worthy charities. In fact, such donations are encouraged by the IRS providing fair deductions are claimed. Action Donation Services and their client charities support the new regulations and believe that donor's should only take the appropriate deductions for the donations they make.
Generally, if you itemize your deductions, your charitable donation should qualify as a tax deduction.
For property sold under $500, you may claim the greater of either the fair market value or the sales price (not to exceed $500).
For property valued over $500, the following applies;
If we administer material improvements, we will print a detailed description of these improvements on the tax receipt (IRS form 1098-C). If the IRS determines that the improvements listed on the 1098-C form constitute significant material improvements, then the donor may be allowed to deduct up to private party value. Private party value can be determined a number of ways such as; a valuation guide (Kelley Blue Book, NADA, Edmunds) or an appraisal by an independent appraiser. If significant material improvements are not made to the property, then according to the new tax laws, the amount that can be claimed by the donor as a deduction is determined in most cases by what it actually sells for (the gross selling price).
Action Donation Services will issue your tax receipt on behalf of your chosen charity and mail it to you as soon as your property is sold. We will mail one copy of the 1098-C form to the IRS and two copies to you. You must attach a copy of IRS Form 1098-C to your tax return when claiming deductions. The IRS requires that donated property valued in excess of $5,000 be appraised by an independent appraiser. For additional information, please contact your tax professional or visit: www.irs.gov
We strongly recommend all donors check with the IRS or their tax professional before claiming any deductions to be sure they obtain the maximum legal tax deduction.
The following IRS documents may also be helpful: