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Want to raise some extra cash in a hurry? Hold a yard sale and unload unwanted electronics, clothing, furniture or other household goods. Get rid of anything you don’t want, need or use regularly. These items can also be auctioned on eBay (www.ebay.com). When you get the money from your sales, send it to your creditors to pay down your debt. You can also donate most goods to charity, get a receipt for your contribution, and reap a tax break for your generosity.
Holiday Giving All Year Round
November and December tend to be the months when many people turn their thoughts to charitable giving. However, you don’t have to wait until year’s end to be generous. But scores of citizens don’t get the tax breaks they deserve from their philanthropic efforts simply because they vastly underestimate the value of their donations – or they’re among the 80 million Americans who don’t itemize their deductions, and therefore can’t claim charitable contributions on their federal tax returns.
But with just a little bit of work, you can reap big financial benefits from your generosity.
For many givers, the key is to correctly calculate the total value of your charitable largesse – whether it’s cash, or figuring out the worth of a couch, computer monitor, or a man’s suit donated to charity.
Here are five suggestions to get the most out of your charitable giving. You may not have big chunks of cash to donate to organizations like the Salvation Army or Red Cross. But if you donate any non-cash items – like clothes, toys, or household goods – you need to figure out the cash value of those items. The IRS isn’t known for having simple rules and codes. But this is one area where Uncle Sam is very clear: you can deduct the going price for an item based on its condition at the time you donate it.
- One way to value your donations is to find out what a local thrift shop or consignment store charges for similar items.
- You can also look at the classified ads in your local newspaper for the price of a similar product. Again, you’ll need to take into consideration the condition of your donation. If you’re giving a fairly new coat that’s in excellent condition, you could adjust the value upward from what others are charging.
- Finally, if you’d rather not call up thrift stores or go through classified listings, you can use a software program, such as ItsDeductible, which has already surveyed average prices nationwide. The ItsDeductible software, owned by Intuit (www.intuit.com), determines and assigns accurate valuations to thousands of commonly donated items. This way, there’s no guesswork in valuing your donations – and you can have confidence that you’re not overstating the value of your donations. Neither would you be shortchanging yourself by taking deductions that are too modest, as most people do.The folks at Intuit are so confident that you’ll get big returns by using their software that they guarantee that ItsDeductible will save you at least $300 in taxes.You’d probably be surprised to know what you can legitimately claim for items in good condition that you donate to charity. At last check, a computer monitor was valued at $107, a man’s designer two-piece suit $399, a girl’s casual dress $8, a silk tie $26, and a pullover sweater $21, according to ItsDeductible.
- For additional information, get a copy of IRS publication 561, called Determining the Value of Donated Property. You can also call the IRS at 1-800-TAX-FORM and request a free copy of this publication.
- You should always have records to back up your estimates.
For any contribution under $250, keep a receipt from the charity, or your own written record of the donation. It should show the charity’s name and address, the date and location of the donation, a description of what you donated, its market value, and the original cost.
If you give something valued above $250, you should have a letter or written acknowledgment from the charity documenting the specifics of your donation, and spelling out any good or services you may have received in exchange for your contribution. For items valued between $501 and $5,000, you should also be prepared, if necessary, to show the IRS records indicating how you originally obtained the property (whether it was a gift, purchase, or inheritance), its original cost, and the approximate date that you obtained the property.
Next – Congratulations, you’re almost done. Continue to Week 4
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