Atlanta CPA on Understanding Tax Rules for Property Contributions to Charities www.HisCPA.com
Atlanta CPA on Understanding Tax Rules for Property Contributions to Charities
Though we all appreciate the value of what we buy and what we can do for others, the IRS is not as concerned. Charitable giving to charity has long been a deduction that the IRS has allowed when taxpayers, who itemize, prepare their personal income tax return. However it is one of the most misunderstood areas of tax law and one which continually needs clarification.
For purposes of valuing items given to charity, IRS rules do not allow us to consider the original purchase price but rather the present fair market value. A good rule of thumb and another way to look at it might be to evaluate what we might pay for an item, for example, at a flea market. This would not necessarily even be the list price at a garage sale but what at item would actually sell for. For it is when two independent people agree to a sales price in a normal sales environment, can true value be determined.
For example, for a couch, chair and ottoman that you might have shopped and shopped and purchased at a great reduced sales price of $3000 would be worth much less the day they are purchased. Most retail items lose half to two-thirds of their initial purchase price in just a few short weeks/months and then even more if we keep them longer. For example if the same couch, chair and ottoman were later given to a charitable organization (even if in excellent condition) would be valued/worth only a small portion of the original purchase price. In fact, the best way to fairly value property items given to charity would be to ignore the original purchase price altogether and to value items at what they would sell for at a flea market.
There have been many in the news over the years for unduly valuing items well in excess of their true worth. Following these guidelines will do much to ensure that you do not become one of them.
John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11′s: Job’s Journey and to learn about his ministry. To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304.
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