Figuring the Fair Market Value of Charitable Contributions
If you itemize your tax deductions, you can claim charitable contributions you make. Knowing how to claim charitable contributions can get a bit sticky, but don’t worry. The process is easier than you might think. The IRS states that you’re entitled to deduct the fair market value (meaning what a willing buyer would pay) of items, in good condition, that you donate to qualifying charities. However, the vast majority of people miss out on tax savings to which they’re legally entitled because they don’t know how to determine the fair market value for their donations.
For the simplest method of figuring out the fair market value of particular items you donate, try using the TurboTax ItsDeductible program if you make regular donations of personal property. The software costs about $20 and can easily save you many times that amount in taxes. The ItsDeductible program has compiled pricing data based on extensive research of resale outlets as well as recent market data from eBay and provides you with the fair market value of an item as well as a detailed report for your tax filing purposes. And you shouldn’t need to buy the software each year because values tend to remain fairly steady or inflate slightly over time.
The rules changed in 2006 regarding charitable contributions. Now you must get a receipt from the charity substantiating all your contributions or donations. Also, items must now be in “good” or better condition to qualify for a deduction.