While a myriad of complex deductions are available through the IRS, non-cash donations, also referred to as charitable contributions, are commonly overlooked deductions that can significantly impact one’s tax situation. Non-cash donations include clothing and household items, vehicles, art, collectibles, etc. If you have made charitable donations in the past year, it is essential to understand IRS Form 8283, your legal responsibility in reporting these donations, and the procedures required for valuing these contributions.
Form 8283, or the Noncash Charitable Contributions tax return, reports all non-cash donations. You need to figure out the contribution deduction amount before completing the form based on your tax return instructions.
One main advantage of itemizing donations is that you can claim the entire value of the gift without factoring in an item’s depreciated value. However, if an item’s original value cannot be determined (even with the use of an appraisal), you may be only able to claim a portion of its value.
If you have a donated property of $5000 or less and publicly traded securities, you need to list down in one section the details of these donations under Section A of your federal income taxes. Meanwhile, if you have donated property over $5000 with the exception of publicly traded securities, vehicles, intellectual property, or inventory reportable in Section A, a qualified appraisal is generally required under this Section B.
The form requires individuals to provide detailed information about their donations, including where the item came from, its condition, how it was used, and any other pertinent information. It is up to the donor to provide an accurate estimate of the fair market value of the donated property.
Donating non-cash property can be a great way to help out organizations you care about, while also saving money on your taxes. But it is important to take the time to properly document your donations and determine their fair market value in order to maximize your deductions and minimize potential complications during the tax filing process. At the end of the day, knowing the ins and outs of IRS Form 8283 and the proper valuing of property donations can make a big difference in your tax situation.
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