One of the best known deductions available to taxpayers is the federal tax deduction for charitable contributions. The deduction allows you to reduce your reported income and thus owe less federal tax. For cash contributions, the calculation is quite simple. However, when donating physical objects, it is not so easy to figure out how much deduction is allowed. In addition, there are rules about when an appraisal is required as justification. Here, then, are some rules of thumb to keep in mind. Please consult a tax advisor for actual tax advice.
Less than $500 – If you donate an item that is worth less than $500, you do not need an appraisal nor do you need to fill out any special forms.
$500 - $5,000 – If you donate an item worth between $500 and $5,000, you do not need an appraisal, but you do need to fill out IRS Form 8283. Exception: If you donate something that is NOT in good condition (fair or poor condition) but is valued at over $500, then you do need an appraisal. The idea here is that the IRS wants justification for valuing something that is in poor condition at over $500. This is not common, but can happen. For example, even a wrinkled and torn Honus Wagner T206 baseball card is going to likely fetch six figures.
$5,000 - $20,000 – Appraisals are recommended to avoid an audit. However, they do not need to be attached to your tax form or submitted to the IRS.
$20,000+ - Appraisals required and a complete copy of that appraisal must be attached to the tax return. Professional quality photographs must be provided upon request.
$50,000+ - The appraisal submitted must show all comparable sales used in the analysis and must include a discussion justifying the reasoning used to arrive upon the valuation.