Join Us For TaxNow's First Webinar
ERC Unpacked: Exclusive Processing Insights, Emerging Trends, and TaxNow's ERC Tracking Tools
For those who live by the motto ‘out with the old, in with the new’, keep reading!
As you transition your closet to summer clothes, you may find yourself tossing a large portion of your wardrobe in the “To Donate” pile. As you bag up your items for donation, do you ever think: can I really write off thousands of dollars in clothes I've donated?
The answer is yes, but there's a bit more to it than just handing over a bag of clothes and getting a large deduction on your taxes. Let’s break down the essentials.
First things first, you need to understand Fair Market Value (FMV). FMV is the price that property would sell for on the open market. Imagine a willing buyer and seller agreeing on a price, with both having all relevant facts about the item. That’s FMV in a nutshell.
When donating clothes (or any property), you must determine its FMV on the date of the donation. This value is crucial for figuring out your potential tax deduction.
Although many sites make a killing off of used clothing, the reality is, they typically sell for much less than what you originally paid. Thrift shops and consignment stores can give you a good idea of what your items are worth, but it’s important to note that you can only deduct clothing that is in "good used condition or better."
If you’re claiming a deduction of more than $500 for any single item of clothing, (goodbye, Jimmy Choos), you’ll need to jump through a few extra hoops. Starting with a qualified appraisal and a completed Form 8283.
To get the most out of your donation, follow these tips:
So, while you can write off thousands in donated clothes, it’s crucial to follow the guidelines to ensure your deduction is valid. Happy donating!
