Donations and deducting?

[Gardenarian]

Help! Could someone tell me approximately how much you save on taxes when you make donations to charities? For example, if you donate a car worth $6000, does that subtract $6000 from you gross income? How does this work?
Is it the same for cash donations to charities as it is for goods? ($50 cash to Oxfam v $50 worth of clothes to Goodwill?)
Thank you so much!

[sweetana3]

Generally !!! it is the same. However, the rules for cars and such have changed. It is not what you think it is worth, but what they sell it for. "Worth" is an often misunderstood word. Worth to whom?

http://www.irs.gov/taxtopics/tc506.html for basic information and go to the Publication for more detailed information.

Be aware that charitable contributions are an itemized deduction along with interest, taxes and medical for example. They are not deductible directly against income. So many do not qualify to claim charitable deductions since the standard deduction is more than the itemized deductions they are able to list.

There are steps to check. Did you give to a qualified organization, what is the proper amount to deduct for the item, do you have the required paperwork, etc. I do not know if Oxfam is a qualified US charity as Goodwill is.

[Spartana]

Be aware that charitable contributions are an itemized deduction along with interest, taxes and medical for example. They are not deductible directly against income. So many do not qualify to claim charitable deductions since the standard deduction is more than the itemized deductions they are able to list.



This! If you don't have enough other deductions to itemize BEYOND the standard deduction (including the value of the car), then you may be better off selling your vehicle and just taking the cash for yourself. Your standard deduction will depend on your situation - single, married, head of household, over 65, blind, etc... The single person non-old, non-blind is around $5,750 I think for 2010. Also there may be a max. charitiable deduction limit per tax year (use to be) so check that out. And, depending on the state you reside in, you may, or may not, be able to take the same deduction on your state taxes as on your federal taxes.

This from the fed booklet on charitaible contributions:

"The amount of your deduction for charitable contributions is limited to 50% of your adjusted gross income, and may be limited to 30% or 20% of your adjusted gross income, depending on the type of property you give and the type of organization you give it to. A different limit applies to certain qualified conservation contributions. These limits are described in detail in this section."

Also:
"Car Contributions: Must Have Written Acknowledgement
If you contribute a car, truck, boat, airplane, or other vehicle, and the vehicle is worth more than $500, you must received a written acknowledgement from the non-profit before you can claim a tax deduction.

Non-Cash Contributions over $5,000: Must Have Written Appraisal
If you contribute property worth more than $5,000, you must obtain a written appraisal of the property's fair market value."

[Gardenarian]

Thanks for your feedback!
My husband is self-employed (musician) and files a schedule C, so I believe we itemize all our deductions. (Though my tax knowledge is limited to throwing everything in a box and handing it to our tax acccountant.)

The situation I'm dealing with is that my husband has seen the decluttering light :cool: and has a ton of stuff he wants to get rid of. He's got some things that are, collectively, worth quite a lot. He's trying to decide whether it is worth his time to try and sell things on Ebay or if he would do just as well donating them. I'm trying to get him to donate stuff, as doing Ebay drives him crazy and seems to take an inordinate amount of time.

I guess I'll have to go and read through those IRS documents!

[sweetana3]

Schedule C has generally nothing to do with charitable family contributions. However, the donation of a business vehicle or one used for business throws another whole complex set of issues into our previous general discussion. If he is thinking of disposing in any way of business assets (showing up as depreciation or as an expensed item on his business forms), big time tax consequences are possible.

This is a good time for a consult of a tax professional. Before taking a possible big taxable consequence issue rather than after when you are hitting your forehead and saying "duh".

Wage earner tax returns = easy. Business or self-employed tax returns = complex and affect many discussions in completely different ways.

[Spartana]

And you also need to decide if the reason you want to donate a car - or other things - to charity is to give or if it's for your financial advantage. If it's mainly a tool to lower your taxes then you'd be better off selling the car yourself and pocketing the money. For example, donating a $6,000 car to charity and taking the write-off would lower your taxes by only approx. $900 (based on filing jointly with a $50K income before idemizing other deductions equal to the amount of the standard deductions, & exemptions). So if having more money is your main goal, you'd be better off selling that car for $6,000 and just paying the higher taxes - or funding a traditional IRA for the same $6,000 tax deduction.

[Madsen]

I think because it's a recent thing for your DH to be decluttering, and because ebay is a hassle, it'd be better to donate most items.
Save ebay for the higher-dollar stuff.
Also I've heard selling "lots" of items can be a good way to go on ebay --- i.e. sell a bunch of office stuff in a single auction, sell a bunch of computer stuff in another, etc. Less pictures to take, listings to create, and you can still get a couple bucks more than you would from going the donation route.

Whatever you do, make it as easy as possible for the decluttering/streamlining to continue. :)