You can deduct donated goods

Q: We always try to make charitable contributions, but this year is a bit tight for us (as well as many others, I'm sure). If we donate furniture, clothes and other used items, how do we determine the value of these items? We always donate a few dollars to the people soliciting donations outside of stores. Is there any way to deduct these small amounts? It has been a rough couple of years for many people. It is nice that you still want to make charitable donations. Even if you can't write a check this year, donating furniture, coats, clothes and toys in good condition is a great way to help others. You may also want to make an inquiry to one of your favorite charities about donating your time. Time spent stocking shelves, packaging food baskets, helping with meal preparation and other efforts may not provide you with a tax deduction, but it can satisfy your desire to help others less fortunate. You can't take a deduction for your time, but you can deduct any out-of-pocket expenses.

You will need a receipt, canceled check or other reliable written record. If the expenses are $250 or more, you will need an acknowledgment from the charity. The acknowledgment must include a description of the amount of cash and a statement as to whether you received any goods or services in connection to the expense.

The charitable deduction for noncash items is typically the fair market value of the item. The items must be in good condition and useful to others for a deduction to be claimed. Thanks to what may be called the "Bill Clinton provision," some used items may not be eligible for a tax deduction. Reportedly when governor of Arkansas, Clinton claimed a charitable deduction of $2 to $3 for his old underwear.

Subsequently, Congress revised the charitable tax laws, and the IRS may deny a deduction for items of minimal monetary value such as donations of socks and underwear. Don't throw these items away, as some charities still welcome these nondeductible items because they can bale them and sell them as rags.

Some charities provide donated goods valuation guides that may be helpful for noncash items. The Web site www.uss.salvationarmy.org has a suggested valuation list.

Taking pictures of your good condition noncash items is a good way to ensure that they will be eligible for a deduction.

Less than $250: If the value of your single noncash donation is less than $250, all you will need is a receipt or reliable written record. Reliable written records must include the name and address of the organization, date and location of the contribution, description of the property, fair market value of the property and, if applicable, any terms or conditions attached to the donation.

Between $250 and $500: If the single noncash donation is between $250 and $500, you will also need an acknowledgement as outlined above for out-of-pocket expenses.

Between $501 and $5,000: If the value is between $501 and $5,000, you will also need to file IRS form 8283, Section A.

More than $5,000: If the value is greater than $5,000, in addition to written records and an acknowledgement, you will need a qualified appraisal and declaration of appraiser and donee acknowledgement (IRS Form 8283, Section B). If you have an item valued over $5,000, you may want to sell the item and donate cash, thereby eliminating the cost of the appraisal.