Cars 
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How to Donate a Car

Donate Your CarWe listen to a lot of NPR (WAMU) and every so often we’ll hear a pitch to donate our “used vehicle, RV, boat or airplane.” We considered donating our private jet, seeing as how they’ve fallen out of favor ever since the auto company CEOs used theirs to a Congressional hearing, but just haven’t pulled the trigger yet.

One thing we have done, though this predates our appreciation of NPR by several years, is donate a used car to a charity. About seven years ago, my wife’s car died (blown head gasket) and it didn’t make financial sense to repair it. We were looking around at our options and decided that donating it to a local school was the best option for us (I mentioned the car in passing in my post on why you should donate your car).

So how do you donate your car? It’s a simple three step process.

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 Philanthropy 
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Use Charity Navigator to Research Charities

As we near the end of the year, you’ll inevitably start seeing year end tax tips type of posts (I promise you at least one before we close out 2010). Those year end tax tips will certainly recommend that you make some charitable contributions before the end of the year so that you can take advantage of the tax deduction for this year. Before you go out donating money to every organization that you think is worthy, I recommend that you do a little research on charities to make sure your dollar can go as far as it can. With the economy as weak as it is, it’s important to make those contributions count.

Charity Navigator is my go-to charity rating site whenever I want to learn more about the effectiveness of a particular philanthropic organization. They do a fantastic job of reading through the financial statements and boiling it down to metrics that matter. When it comes to donating, you want your dollars to go as far as possible. I don’t want to have fifty cents of every dollar going to fundraising, I want 80 cents to go to the mission and maybe 20 cents to the “other stuff.” (even that seems high to me)

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 Taxes 
5
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Deducting Credit Card Reward Donations

For years I’ve been accumulating reward points in Citi’s Thank You Network with my Citi mtvU credit card, usually turning them into student loan checks for ACS. With my student loans paid off and the conversion rate weaker (it used to be 2,500 point for $25, now it’s 3,300 for $25), I’ve been looking for an alternative in the gift card department. Unfortunately, none of the cards are really appealing and I thought we could convert the points into a charitable donation but I wasn’t sure how the deduction worked.

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 Philanthropy 
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How to Value Your Clothing Donation

Goodwill Collection BoxEvery year, my wife and I go through all of our clothes and pick out the stuff that we haven’t worn in the last year. You know what these are, the polo shirt that has been in the back of the closet since two years ago, the button down that no longer feels right, the sweater that’s ugly but old enough that your aunt forgot she gave it to you… we throw all that stuff into boxes or bags and send them over to our local Goodwill for a sweet sweet tax deduction. We’ve only been able to do this the last three years, since buying a house, because you can only deduct those donations if you itemize your taxes. I think philanthropic donations should be deductible even if you itemize but those are the rules.

Donating “stuff,” be it your car, your clothes, or something else, was one of the ten year end tax saving tips and you still have time to do it. Even if you don’t itemize, consider doing it just so you can clear yourself of some clutter. Your donations let Goodwill or the Salvation Army earn extra money to fund their operations and it provides affordable items for purchase from their customers.

The trickiest part about the entire process is how do you assign a value to the items you’re donating? Chances are the IRS will never come knocking on your door and asking how you valued your clothing because it’s simply not going to be a lot of money involved. However, this doesn’t mean that you can shirk on documenting because if they do show up and you don’t have records, they may invalidate the donation and you could find yourself paying interest and fees!

How To Donate & Document Donated Clothes

  • Gather up everything and create a list of items: Simply create a list of all your items and include as much information as possible. Anything you want to donate has to be in “good” condition or better. You can put the brand and type of clothing (Stafford button down, American Eagle polo, Gap jeans, Ann Taylor sweater), its condition, the estimated purchase price and date (if you can remember), and the fair market value at the time of donation. The more information you have down, the better. If you think anything you list sounds unbelievable, take a picture (the IRS may not believe you’re donating a $200 suit in good condition, for example)
  • Rememebr to get a receipt: Whenever we go to the nearby Salvation Army, we just give the bag(s) to the person working the bench, he or she tosses it in a huge pile, and then they hand us a pre-signed blank receipt. Some places won’t give you a receipt for small donations but I would always get one and fill it out with as much information as can fit, then just refer to another page. Some people recommend putting something vague (because you have better records) but I put a listing (3 shirts, 2 pants, loafers, etc) of actual items and then refer to another document with specifics.
  • Worth more than $500? If you donate more than $500 of clothing, then you’ll need to fill out Section A of Form 8283 Non Cash Charitable Contributions. Don’t let the form scare you, you won’t need an appraisal unless you donate more than $5,000 – which is a lot of used clothing.
  • Claiming the deduction: Last step is to remember to claim the deduction on your tax return! You’ll always list it on Schedule A of the 1040 but if you do your taxes with a software product (highly recommended), they’ll just ask you as you fill it out. They may even offer guidance on valuation.

Determining Clothing Fair Market Value

And… here’s the tricky part. By definition, the fair market value is the reasonable price that a regular person would pay for that item. Imagine if you saw that item at a garage sale or a used goods market, how much would you pay for it? That’s the fair market value… you see how ambiguous it is?

Fortunately, there are plenty of resources available to help you determine how much your stuff is worth. The Salvation Army has a valuation guide for everything from clothing to appliances, children’s items to furniture. It’s pretty comprehensive and includes a range so you can decide, based on condition, how much it’s worth. Goodwill has a similar valuation guide in PDF form.

Finally, if you’re an IRS publication junkie, you can always check out Publication 561, Determining the Value of Donated Property, and Publication 526, Charitable Contributions, for more specifics, scenarios, and other useful tidbits boringly explained.

However you value your old stuff, remember that donating it in the first place is more important than not donating because you aren’t sure how to handle the deduction. In the end, it won’t save you a ton of money regardless and it’ll make life easier for some charities and perhaps some individuals.

(Photo: roadsidepictures)


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