True charity is something we do out of the kindness of our hearts. Whether it’s something you do every year for your favorite nonprofit or a spur-of-the-moment kind of thing, it’s always an altruistic act. To amend the famous saying, when life blesses you with an abundance of lemons, make lemonade and donate the proceeds to charity!
When a loved one passes away, we often choose to honor their spirit by donating in their name. Turning your personal loss into something that can benefit people in need is one of the most selfless acts possible. So, it makes “cents” that your kindness be rewarded with a deduction when this Tax Day rolls around!
A Few of Your Options
At Art of Downsizing, we believe that it’s a perfectly viable option to opt out of having an estate sale for your estate liquidation. If it works for your situation, donating all of your loved one’s items to charity can be a positive outcome for you and for those in need. We can also arrange to have unsold items left over after an estate sale donated for you. Talk to the experts at Art of Downsizing or your CPA to learn your options.
Even with the best of intentions, an estate liquidation can be a difficult process for all involved. When donating items such as furniture, clothing and other household items during your estate liquidation, it can be a tricky process to ensure you can deduct the greatest amount from your taxes. The IRS requires items to be in good condition for a deduction. But charities like The Salvation Army often take donations of varying quality.
The Proof is in the Paperwork
Often, the last thing you want to worry about when sorting through which items to donate in an estate liquidation is the documentation needed to make it count on your taxes. Do not fear! We’re here to help you — we provide a complete inventory of the contents of your home, with original asking prices and each item designated as sold or donated. We also collect your donation receipts as we clear out your home after the sale. The most important thing to remember is always to get written confirmation from a charity when you donate. We’ve got you covered! Don’t wait until you’re doing your taxes to get this documentation. File your tax receipts away in a safe place so you’ll be prepared when the time comes.
Limits Do Exist
Estate liquidation through donating or combined with selling, can have many financial benefits for you, as explained above. However, there are certain limits on the process, which you should take into consideration:
Donating items to your family or specific individuals in need, instead of selling them to the public, is a kind and selfless act, but there are no tax deductions that come from this.
Any property that was owned for more than a year can be deducted for an equal amount to the item’s fair market value (the price of the item as the time of the person’s death).
For total non-cash contributions greater than $500, the IRS requires you to attach form 8283 to your tax return with the name of each organization given to and a general description of the items donated and the value donated to each organization. If your total non-cash contributions are less than $500 you can just show the amount claimed on your tax return.
Any items for which you claim $5000 or more in value must have been appraised for at least this amount.
You can deduct up to 50 percent of your annual gross income from your charitable donations to a non profit, as long as you have an itemized list of everything given, including values assigned for each item.
And don’t forget, all donations must be made by December 31 for them to count on your taxes for that year.