If you donate valuable items to charity and wish to claim a tax deduction, you may need to obtain an appraisal. The IRS mandates that donors and charitable organizations provide specific information to substantiate their right to deduct charitable contributions.
Protect Your Deduction
In order to deduct charitable donations, you must first itemize your deductions. Tracking your purchases and receipts through your bank’s mobile app can help tremendously when it’s time to record your itemizations. If you donate a gift valuing $5,000 or more, certain appraisal requirements will apply. You must:
Get a “qualified appraisal” prepared and signed by a qualified appraiser,
Receive the qualified appraisal before your tax return is due,
Attach an “appraisal summary” (Form 8283) to the first tax return on which the deduction is claimed,
Include other information with the return, and
Maintain certain records
Your appraisal isn’t submitted directly to the IRS in most cases, but should be attached to the donor’s tax return. In cases where the donated gift is an art piece valued at $20,000 or more, or %50,00 or more in total of all donated gifts, a copy of the appraisal with the appraisal summary must be attached. If an item of art has been appraised at $50,000 or more, you can ask the IRS to issue a “Statement of Value” that can be used to substantiate the value.
What Happens if You Don’t Comply?
Your charitable deduction could be denied, or lost.
Exceptions to the Requirements?
A qualified appraisal isn’t required for contributions of:
A car, boat or airplane for which the deduction is limited to the charity’s gross sales proceeds,
Stock in trade, inventory or property held primarily for sale to customers in the ordinary course of business,
Publicly traded securities for which market quotations are “readily available,” and
Qualified intellectual property, such as a patent.
Also, only a partially completed appraisal summary must be attached to the tax return for contributions of:
Non-publicly traded stock for which the claimed deduction is greater than $5,000 and doesn’t exceed $10,000, and
Publicly traded securities for which market quotations aren’t “readily available.”
What if you Donate More than One Gift?
If you donate multiple gifts in a tax year to one or more organizations, the value of each similar gift is combined to determine your "total donated" value. Similar gifts are those that fall within the same category; for instance, if you donate books to various organizations, the total value of all the books is added together. Similarly, if you donate paintings to one or more organizations, the cumulative value of all the donated paintings will be used to determine if your donations meet the $5,000/$20,000 threshold.
Bottom line - you must carefully comply with appraisal requirements to avoid the risk of your charitable deduction being disallowed. Contact us if you have any further questions or would like to discuss your charitable giving plans.