When it comes to donating stuff to charity, Gary Germer says most people underestimate its value. The antique appraiser joined us to share how to maximize our donations.
Average people do not take what is their due — especially when moving or downsizing — but it adds up. You need to document: count how many pieces of clothing (how many pants, shirts, etc.), books, or household things that you are donating. Take pictures. Make a list or spreadsheet, and keep it in case of an audit. You can take Fair Market Value for your used things — Goodwill has guides for FM value. These are guides; values vary and are subjective (clothing from Target vs. designer wear from Nordstrom, designer furniture vs. mass produced).
Condition matters: no broken, ruined, or soiled things. That cuts deeply into the charity's bottom line to dispose of — and it's bad karma for you. This is a major and unfair expense for nonprofits.
Example: books take $1.00 to $2.00 each. I cleaned out my bookshelves and purged, and ended up with 123 everyday books, and got a $185.00 donation credit. These were everyday books I had read, probably got at estate sales, that Powell's did not want, so that translates into an approx. $65.00 tax savings — and I did not have to run a garage sale! Same is true with everything else: just keep the photos and spreadsheet along with the donation slip with your taxes, just in case you're lucky enough to get an audit.
Not all things are equal: designer clothing might need direction from a vintage clothing dealer to help you estimate a fair market value, as well as artwork, antiques, and collectibles. Get an evaluation from a professional to maximize your donation. You can call a local dealer for advice, find an online dealer and get direction from them, or use Etsy, Rubylane, and LiveAuctioneers to see similar things for sale or which have sold. A little homework can mean $$$.
Donation of more valuable things: $5,000 is the magic number. If you are donating art, antiques, or a collection of things and are claiming more than $5,000, you are required to have a professional appraisal. If you're claiming less than $5,000, you don't need the appraisal, but you need to have a reason for your valuation — so again, with the documentation.
Possible problem: if you donate an item or collection of value and the charity sells it within 3 years of donation, they're supposed to report to the IRS what they sold it for — and the IRS can and probably will readjust your tax returns for what it sold for as opposed to what you claimed it was worth.
Ideal solution: donate to a charity which will use your donation as opposed to selling it (children's books to schools, art/antiques to retirement communities or colleges, etc.), so there's no question about sales price vs. donation value.
The IRS is watching, especially donation of fine art and antiques. There was a big scam in the 1990s where people would donate a work of art, get an official-looking appraisal (but not a qualified one), and then donate it to a charity auction. Someone would buy this item — say, appraised for $20,000 — for $3,500, then donate it again to a different auction and claim a $20,000 donation. This one item could account for $100,000 in tax donations over one year. The IRS has clamped down, so document, get an evaluation or formal appraisal.
Vetting your charity of choice: Goodwill is the largest and easiest, but there are others helping people locally — William Temple House and Community Warehouse are a couple I support, but there are many others as well which help our local community. Choose a couple to work with and stick with them. Also, be aware of your charity's special events, and a donation can be tailored to the needs of that event. Think outside the box — for example, a client of mine gave a pair of diamond earrings to a charity auction, fair market value of $1,500.00. I persuaded the auction committee to raffle this off: $50 per chance, with a total of 50 chances. The charity raised $2,500 on the same item, and my client was able to take a $2,500 deduction.
Legacy giving: you can pre-arrange to donate, at the time of your death, your collections or estate to most any 501(c)(3) charity. Most people think of major art galleries, etc., but smaller charities can benefit as well, even if they don't have a thrift store or auction — they can maximize the value of your donation by working with an estate broker who specializes in art/antiques and items of value.
Originally aired on AM Northwest, KATU.
