The Individual Income Tax Return, Form 1040, allows for a deduction on Schedule A for charitable contributions. Schedule A lists the itemized deductions (home mortgage interest, real estate taxes, government services tax on vehicle licenses, large medical expenses, employee business expenses, etc.). If the total itemized deductions are greater than the “standard deduction” ($6,300 for single persons or $12,600 for joint returns in 2015 with extra amounts for being age 65 or older), the itemized deductions will save income tax.
One of the common itemized deductions is the fair market value of items given to a charity. The non-cash contributions must be listed on Form 8283 if the total is more than $500. Most of us have “stuff” we don’t need or want anymore. It is good to give those items away to charity so someone can use them and you get an income tax itemized charitable contribution deduction for what the charity might sell it for.
Some taxpayers make very large non-cash contribution gifts to charities. If the value is more than $5,000, then Page 2 of Form 8283 is required. An appraisal should be done to show IRS the value is reasonable.
There are special rules about who is qualified to do appraisals. A qualified appraiser must demonstrate verifiable education and experience in valuing the type of property given, regularly perform appraisals for a fee and some other requirements.
If you plan to give collectibles, vehicle, real estate or other items that are worth more than $5,000, Page 2 of Form 8283 usually requires signatures by the taxpayers, the appraiser and an officer of the charity. It is best to get the appraisal done before you deliver the gift to the charity. Also, it is best to get the appraiser and the charity to sign Page 2 of Form 8283 to be part of your income tax return for the year of the gift.
IRS publication 561 gives information on how to value various items. IRS publication 526 has general information on charitable contributions. Maybe you could go to the IRS website, irs.gov, and print out those publications as well as Form 8283 and the instructions for that form.
If you pay the appraiser a fee, that can be a miscellaneous itemized deduction in the year paid — after the adjustment that part of Schedule A requires.
If itemized deductions will save tax (be greater than the standard deduction), then observing the various rules on non cash contributions will be helpful.
Maybe a quick draft of your 2015 Schedule A will help decide if this is the year to clean out the garage, closets and make gifts to a charity.
Did you hear? “What is a weed? A plant whose virtues have not yet been discovered,” by Ralph Waldo Emerson
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.