Key Takeaways
- You'll need to use Form 8283 to claim a charitable deduction if your combined property donations to a qualified charity exceed $500 and you itemize deductions.
- Your deductions are based on the fair market value of the donated property, and it's your responsibility to determine a realistic amount.
- If your donation includes single items or groups of related items valued over $5,000, you'll need to document the value with a qualified appraisal conducted by an expert within 60 days prior to the donation.
- When preparing Form 8283, you'll have to provide details like the name and address of donation recipients, descriptions of the donated property, acquisition details, purchase price, and value at the time of donation.
When to use Form 8283
Federal tax law allows you to claim a deduction for the value of all property you donate to a qualified charity during the year provided you itemize your deductions. Generally, any nonprofit organization that promotes religious, literary, educational, scientific, humanitarian or other charitable causes will qualify. However, if the combined value of all property you donate is more than $500, you must prepare Form 8283 and attach it to your tax return.
Valuing property donations
When you donate property to a charity, the IRS allows you to deduct its fair market value. It’s your responsibility to determine the value of your property donations. There are many ways you can do this, but regardless of the valuation method you choose, your estimated value must always relate to a realistic price that a buyer would pay for the item in the open market.
For example, if you donate used clothing, the IRS suggests you reference the retail price that thrift stores in your area charge for similar items. But if you donate a used vehicle, you must reference a reputable used-car price guide that factors the make, model, year, mileage and overall condition into the price rather than using the price that dealerships in your area charge. If your donated car is valued at greater than $500 and the charity sells it, you should receive a Form 1098-C from the charity that states how much they sold it for. This amount is what you can take as a deduction. Some property donations, such as a rare piece of art, may require you to obtain an appraisal from an art expert.
TurboTax ItsDeductible Online is a free tool that helps you track your donations and determine their IRS-approved value. When you use TurboTax to prepare your taxes, you can import this information directly from ItsDeductible into your tax return.
TurboTax Tip:
The IRS limits your annual deduction for property donations to 50% of your adjusted gross income, but you can carry forward excess amounts to future tax years.
Obtaining property appraisals
The IRS requires you to obtain a qualified appraisal for any single item or group of related items you donate that have a value of more than $5,000. For example, if you donate five rare first-edition books that each have a value of $1,200, you must obtain an appraisal because the items are similar and in total exceed $5,000.
The appraisal must be done by someone who holds some expertise in the type of property and must be signed and dated no more than 60 days prior to making the donation. The appraisal must also include a description of the property and its condition. The appraiser must also sign Part III of your Form 8283.
Preparing Form 8283
To complete the remainder of the form, you must have the name and address of all organizations you made donations to, descriptions of all property, information on how you initially acquired the property, the amount you paid for each item and their respective values at the time of donation. If you maintain adequate records of your donations during the year, Form 8283 requires minimal time to complete.
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Annual deduction limitations
Preparation of Form 8283 does not guarantee that you can deduct the entire value of your property donations in the current year. For most of the organizations you make donations to, the IRS limits your combined annual deduction to 50 percent of your adjusted gross income. In the unlikely event your deduction is limited this year, you can always deduct the excess on one of your next five tax returns.
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