| Wells Income Tax |
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Cleaning Out the Closets – Garage Sale or Giving to Charity?
National Association of Tax Professionals (NATP), Appleton, WI -- Wiping her brow after feverishly
sorting and pricing a closet full of miscellaneous cast-offs, my neighbor remarked, “Is having a
garage sale really worth all the trouble?” Good question. Especially when you consider the time
savings and the tax savings you could realize from donating the items to charity.
Giving to charitable organizations is a win – win activity for both the giver and the receiver. Gifts
help the organization, help those who cannot afford higher priced new items, buy you valuable
time, and can create a tax benefit for the giver. What are some common types of contributions
and what is their value as a tax deduction?
Although certain limitations may apply, a dollar for dollar reduction in taxable income is available if
you itemize your deductions. Contributions are limited to 50% of your income if they are made to
U.S. charities such as churches, educational organizations, hospitals, and other nonprofit
organizations. Contributions are limited to 30% of your income if they are made to veterans’
organizations, some domestic fraternal organizations, nonprofit cemeteries, and certain private
foundations. A good accountant can answer more questions regarding charitable contributions.
Before you go crazy cleaning and tossing items into boxes, remember that proof is important and
required. If you compile your list as you collect the items together, it’s an easy task. Make a list of
all the items you are donating and ask for a receipt from the charitable organization when you
drop them off. Receipts are needed for contributions of $250 or more, and they need to include
the organization’s name, the date, the amount of the contribution, and the value, if any, that you
received in exchange for the contribution.
So, hmmmm…..garage sale -- marking, cleaning, and sitting there all day? Or giving everything to
your favorite charity, collecting a tax-deductible receipt, and going on a picnic with your favorite
friend? Which do you choose? As for me, I’m grabbing the blanket and paper plates!
National Association of Tax Professionals (NATP), Appleton, WI -- Wiping her brow after feverishly
sorting and pricing a closet full of miscellaneous cast-offs, my neighbor remarked, “Is having a
garage sale really worth all the trouble?” Good question. Especially when you consider the time
savings and the tax savings you could realize from donating the items to charity.
Giving to charitable organizations is a win – win activity for both the giver and the receiver. Gifts
help the organization, help those who cannot afford higher priced new items, buy you valuable
time, and can create a tax benefit for the giver. What are some common types of contributions
and what is their value as a tax deduction?
- Clothing, household items, and furniture are deductible at the lesser of either the cost or its
current value. Consult a reliable resource (most charitable organizations have a list of
suggested values) for deductions. You might be surprised at their generosity! In many
cases, it is much more than what you can net at a garage sale.
- Gas and oil for your automobile is deductible, but only for mileage incurred directly as a
result of doing charitable work that is not reimbursed. The standard mileage rate for
deduction is 14 cents per mile.
- Food items donated to churches, food pantries, or other charitable food drives are
deductible at cost.
- Be a nice neighbor and bake a cake for a charity event. The cost of ingredients used for
charitable bake sales is deductible.
- Monetary gifts, the most common type of charitable contributions, are deductible in their
entirety provided you have received nothing of monetary value in return.
- If you receive a benefit or something in return for a contribution, only the part of the
contribution that is over and above the value of what you received is deductible. For
example, you spend $40 for a charity dinner. Of that amount, $25 is the fair market value
of the meal. The charitable deduction is limited to the difference of $15 ($40 – 25 = $15).
Although certain limitations may apply, a dollar for dollar reduction in taxable income is available if
you itemize your deductions. Contributions are limited to 50% of your income if they are made to
U.S. charities such as churches, educational organizations, hospitals, and other nonprofit
organizations. Contributions are limited to 30% of your income if they are made to veterans’
organizations, some domestic fraternal organizations, nonprofit cemeteries, and certain private
foundations. A good accountant can answer more questions regarding charitable contributions.
Before you go crazy cleaning and tossing items into boxes, remember that proof is important and
required. If you compile your list as you collect the items together, it’s an easy task. Make a list of
all the items you are donating and ask for a receipt from the charitable organization when you
drop them off. Receipts are needed for contributions of $250 or more, and they need to include
the organization’s name, the date, the amount of the contribution, and the value, if any, that you
received in exchange for the contribution.
So, hmmmm…..garage sale -- marking, cleaning, and sitting there all day? Or giving everything to
your favorite charity, collecting a tax-deductible receipt, and going on a picnic with your favorite
friend? Which do you choose? As for me, I’m grabbing the blanket and paper plates!