Aside from the daily inundation of – feel good, sustain the environment, reduce your carbon footprint and more – be sure to consider the tax advantage of making donations available for reuse. You can actually make money – not directly, but indirectly – by giving away your unnecessary goods. So how does this work? Through tracking all of your donated items during the calendar year, and assigning each item a resale value, you can deduct the total estimated value of all these items on your annual tax return. Note that this works only if you itemize your deductions; however, this is a very likely situation if you own your own home. By reducing your tax burden through donations, you will have more money in your pocket. So, not only can you feel green about reducing landfill waste while providing a second home for your extra things – you can also gain some added green for your wallet. We realize that it’s a lot of work to find second homes for your stuff, but R-Cubed is here to simplify that process for you. You don’t need to do the research yourself; it’s already been done and, for a small fee, can be tailored to meet your needs. Keep in mind that the donation route will often net you more than trying to sell your items, particularly when you factor in the time you spend. It’s rather difficult to find buyers for run-of-the-mill used goods, and garage sales involve a significant amount of organizational time. Therefore, with the end of the year quickly approaching, this is a good time to go through your belongings and clear out what you no longer need or use by donating. You should see some extra cash around April 15th when your 2014 tax return is due. Another added benefit – you will have room for all those anticipated holiday gifts which are undoubtedly coming very soon! According to Charity Navigator, you should clearly contribute, rather than throw out, old clothes, furniture and equipment that you no longer use. But bear in mind the condition of your donated goods. The IRS only permits deductions for donations of clothing and household items that are in “good condition or better.” Below are some examples of estimated tax savings based on donating various items with a fair market value of $800. The amount of savings will depend on the upper limit of your tax bracket.
To get a rough idea of your tax dollars saved, just take the total donated value times the top percent of your tax bracket. For example, 28% of $800 is $224. Even though it is not a huge savings windfall, every dollar counts. Most of us feel that we already pay too much in taxes! Key Tax Notes It is extremely important to hold onto documentation of your donated goods, so always collect a receipt. Be careful about placing items into a bin where no receipt is available; you may be able to get an on-line receipt from that charity, but make sure to check this out first. For a single donated item, worth more than $500, the IRS requires a qualified appraisal to be submitted with your tax return. The organization to which you are donating will also need to provide a signed acknowledgement. We highly recommend that you consult with your tax adviser if you have any one item exceeding $500 in value. In addition, for a group of donated items totaling $5,000 or more, the documentation and rules become more complicated. Again, it’s best to check with your tax adviser if the value of all your annual donated goods is greater than $5,000.