Taxable donation - valuing personal care items

Discussion in 'Hot Entrepreneurs: Build Wealth & Share Links' started by wrenbe, Sep 20, 2016.

  1. wrenbe

    wrenbe Active Member Trader Group

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    So we're going to this trivia for the Immigrant Womens Refugee Fund again this year and I made it my mission to give a good size donation of personal care items (laundry soap, toilet paper, shampoo, toothpaste, etc). The director is willing to write me a letter and days I didn't need to itemize my donation, just tell him what its worth.

    Of course I plan to itemize it. And a bit of googling found me a site that said to list the items at retail value (the cost before the sales and coupons) had anyone done this and can confirm this? I ask because my modest donation is coming out to around $400 currently at retail price and I'd hate to get dinged by the IRS.

    I plan to itemize it and take pictures. I didn't plan to save receipts but could probably dig a few up, some of the receipts have been used for rebates though and of course there were multiple transactions.

    Any one have any thoughts?
     
  2. Dengineer

    Dengineer Well-Known Member Trader Group

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    I have donated things in the past, and I too wanted to claim "full retail value" for them on my taxes. However, I have been told by two different accountants that you can only value donations such as you're describing based on the actual amount that you paid for them.
     
  3. wrenbe

    wrenbe Active Member Trader Group

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    Interesting because what I have read (admittedly google so take it all with a grain of salt) is that you should claim fair market value (FMV). Hence the $30 pair of jeans you bought and wore twice would net $6 on you donation claim (likelihood of reselling said jeans for $30 is limited). If I went with what I paid for the items the question them would be if coupons, gift card, and ECB/RR count as "paid." May have to actually contact an accountant. I'm not looking to make a mint off the deduction, from my understanding this will barely dint the total deductions I can have per year, but I also would like to claim it reasonably and at the full amount. When I first started donating to Goodwill I would claim very small amounts for each item ($0.50 tshirts, $1 jeans, etc) and was informed by an accountant I knew at the time of a list through turbo tax that valued my items at 2-3x what I was claiming and was considered an industry standard at the time. It did make a difference in my taxes when added up throughout the year. In all for my about $400 in items I've spent around $75 with sales, coupons, gift cards, ECB/RR.
     
  4. wrenbe

    wrenbe Active Member Trader Group

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    There it is, the site I found: https://www.irs.gov/uac/eight-tips-for-deducting-charitable-contributions

    4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.

    5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.


    Perhaps less than retail but more than coupon-savings? lol I'll talk to an accountant, or just call the IRS... haha
     
  5. vica

    vica Well-Known Member Trader Group

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    Price it at what you would get at a yard sale/flea market - that's a good indicator of FMV. Its kind of irrelevant what your actual cost in this case, so no need for receipts.

    If you go over $5,000 you will have to prepare additional tax forms and it will require a formal appraisal.

    Will it benefit you to itemise your deductions?
     
    Last edited: Oct 10, 2016
  6. wrenbe

    wrenbe Active Member Trader Group

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    I already itemize, so just working out how to value these. I've contacted my accountant friend who's looking into it. Was just wondering how others did it. I think it'll probably come to valuing at FMV, but will update when I hear back just so everyone can have another view on it. In the end, I know I need to own my decision and deal with the IRS if needed--though I don't think that will be the case I always prepare as if it will be. lol
     
  7. wrenbe

    wrenbe Active Member Trader Group

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    And Just to follow up, my accountant friend says to claim FMV (fair market value). So that's what I'll do.
     
    Green is Gold likes this.
  8. Fillies Fan

    Fillies Fan International Man of Mystery! Trader Group

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    This is embarrassing because it reveals how lazy I am but I have never claimed anything as a deduction.

    I simply use the Turbo Tax Premier, report my income and who I am claiming as a dependent (for the past 15 years or so it has been just me), and then download my stock profits and dividends from Charles Schwab.

    The income I earn from work in Israel is not taxable (except, of course, in Israel) but it does impact my tax bracket -- as does my Social Security payments. I only have to pay tax on my investments. I wind up paying a couple of thousand dollars each year to the IRS (I do not bother with the quarterly payments and am willing to pay any penalties for this).

    I simply take the standard deduction, which saves me a lot of effort. However, as I have no mortgage payments, and much of my charitable contributions are to Israeli entities and thus not deductible (although I do tend to go a bit overboard on St Jude's Hospital), I don't know if I pay more or less than if I had itemized but I do know that I have saved a lot of time and effort.
     
  9. vica

    vica Well-Known Member Trader Group

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    Fillies Fan,
    Unless you have more then $6,300 (single, 2016) in itemized deductions you are correct in taking a standard deduction.
    Are you sure your income earned abroad is not taxable in the US? Unless you are a non-resident alien your world-wide income is generally taxed here.
    If you are a resident or a citizen/GC holder you may exclude foreign earned income if you spend about 11 out of 12 months outside of the US and if you qualify.

     
  10. Fillies Fan

    Fillies Fan International Man of Mystery! Trader Group

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    Firstly, let's clarify one thing for others reading this who might not understand it. We are talking about earned income only. That is income which you get from working -- it does not include gifts you might receive or profits from investments.

    Moreover, it is only income you earned while outside of the US. If you work in the US you must pay income tax on money that you were paid on those days.

    There are two tests to see if you qualify for the foreign earned income exemption. You need to qualify under one of the two, not both.

    The first is the "Physical Presence Test" and that is the one you referred to. In order to pass this test you must be out of the US for at least 330 days during the tax year.

    I moved to Israel in 1979 and in most years (I think there were three or four exceptions) I would have qualified under the Physical Presence Test. However, there is a second test and that is the one I use -- the Bona Fide Residence Test.

    Under this test, you must establish a residence in the foreign nation and live there for a full tax year. My full tax year was in 1980. Once you qualify as a Bona Fide Resident you remain one until you permanently end your foreign residence. This allows you to visit to the US without the 330 days per year spent outside of it.

    I have never permanently ended my foreign residence so I continue to qualify under it. The amount of the exemption changes from year to year, but in 2015 it was $100,800. I did not have earned income above that (or even anywhere near that) so all of my earned income is tax exempt in the US (although I must pay Israeli taxes on it).

    Where earned income does impact me is in determining my tax bracket. When determining my tax rate for my investments, I must pay the same rate for them that I would have if my earned income and Social Security were not tax-exempt.
     
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