As a financial advisor who prepares taxes, I see various degrees of substantiation when it comes to non-cash charitable donations (i.e. Goodwill). Everything from handwritten receipts (which don’t work) to detailed records show up in my office. The difference between the two can affect your taxable bottom line. Remember, the better the substantiation, the easier it is to properly value your donation.
This past Sunday, while the weather was cold and dreary, we decided it was time to clean out our closets. Molly and I went to work piling up Goodwill items. We enlisted the help of our kids with the task. Hanna created a spreadsheet to itemize and categorize the goods. Yes, even our teenager was eagerly involved since the work revolved around a computer. Greta took pictures and packaged up the items. Michael simply added sound effects and destroyed piles, so we sent him off to his lair where he could build and destroy his own piles.
Within an hour or two we had several bags of well-organized goods to deliver to Goodwill. Hanna finished the spreadsheet and printed the pictures. I made a quick trip to Goodwill and dropped off a car-load of clothing. Of course, I retrieved the receipt and returned home to finish up the job of filing away my records.
The IRS requires substantiation of non-cash donations. I always tell clients to do four things when donating non-cash items:
- Get a receipt with a date of donation
- Create and itemized list of goods donated
- Take pictures
- Track mileage
Following the above protocol will allow you to properly value your donations, which will more than likely lead to higher donation values…..which in return saves you tax dollars.
One note: remember that all items donated need to be in good or better condition for the IRS to allow the donation. Pictures should cover this need, as well as substantiate the value of your donation.
Our Sunday afternoon proved to be a profitable venture. When all was said and done, our donation will save us over $200 in taxes…..that’s like putting $200 in our pocket. Plus my closet is clean! The bad news is my kids want their cut of the loot, but that’s a blog post for another day!
Any of the above information is intended for informational purposes only and is not intended to be considered tax advice or implemented as such.
Tags: Charitable Giving