Year-end Tax Planning -- How To Increase Your Tax Deductions By Helping Others Over The Holidays
As the year winds down, here's an easy way to put some extra cash in your pocket by donating used clothing and household items to charity
. Why wait until springtime to de-clutter your closets, attic, basement and garage? You can practice the joy of giving without spending a dime, and reduce your tax bill at the same time.
Follow these seven steps:
1. Gather the family together and go on a search throughout the house for things you don't need or don't use any more. Like most folks, you probably have clothes and any number of household items that fit the bill.
2. Take an inventory. Make a list of all the items you've collected. This list doesn't have to be fancy, but be thorough and include everything. If you have multiple quantities of a particular clothing item, write down the number of each item, such as "3 pair of boys' shorts" or "6 men's dress shirts".
3. Assign a value to each item. If you are going to take a tax deduction for these items, it's up to you to determine the fair market value (FMV). The FMV is the price for which you could sell the item if you held a yard sale and actually sold it to someone in a true arm's length transaction. The charitable organization is not responsible to provide this value to you. Fortunately, both Goodwill and the Salvation Army offer helpful guidelines on their websites for common clothing and household items.
For example, the Salvation Army has a "Valuation Guide for Salvation Army Donations" that gives a range of high and low values for the following categories: appliances, children's clothing, furniture, household goods, men's clothing, women's clothing, and miscellaneous. You'll find it at http://www.salvationarmyusa.org/
4. Deliver the goods to your favorite charity. Whether it be your local church or synagogue, or Goodwill, or the Salvation Army, or a clothing bank, give the items away on or before December 31 if you want to take the deduction this year.
5. Be sure to get a receipt from the organization that records the name and address of the organization and the date of the contribution. Again, the organization will not put a dollar amount on this statement, but will leave a place on it for you to write the fair market value.
6. File the paperwork (the inventory and the receipt) in the appropriate tax folder until tax time. You'll need this information when you (or your accountant) prepare your income tax return. Note: You must itemize deductions on Schedule A to deduct these donations of used goods. But even if you can't take the deduction, why not still do the good deed and reap the many intangible rewards of generosity?
7. Pass it on. Tell your relatives about your charitable endeavors at family gatherings over the holidays and encourage them to do the same. Spread the word about how easy it is to reduce clutter, increase tax deductions, and help others by an intentional act of kindness.
Take time to give to others this holiday season and discover again that it is better to give that to receive. Many charitable organizations would be glad to take your used clothing and household items to make someone else's day a little brighter.
by: Wayne M Davies
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Year-end Tax Planning -- How To Increase Your Tax Deductions By Helping Others Over The Holidays