To determine the proper documentation for your noncash donation, you will first need to calculate the fair market value of your property. Several organizations, such as The Salvation Army, have valuation guides on their website that come in handy when determining your overall value.

The following records should be maintained based upon the value under which your donation falls.

Fair Market Value of $1 - $250:
This value level requires a written receipt from the charity, including:

• The organization’s name
• Date and location of the donation
• A reasonably detailed description of property

Furthermore, you must maintain written records for each item of contributed property. Your records should include the fair market value of property at time of donation, plus the method used for deriving the fair market value (appraisal, thrift shop value, etc.).

For any contributions where it would be impractical to obtain a receipt, such as an unattended drop-off site, your own personal written record to substantiate the amounts is generally acceptable.

Fair Market Value of $251 - $500:
This value level requires a written receipt from the charity, including:

• The organization’s name
• Date and location of the donation
• A reasonably detailed description of property
• A written acknowledgement from the charity that states whether or not the organization provided goods or services as a result of your contribution. Ideally this should be obtained at the time of the gift.
• If applicable, include a description and good faith estimate of the value you received in return. Note that this amount excludes certain token items and membership benefits.

Also be aware that separate contributions of less than $250 will not be subject to the written acknowledgment requirement, even if the sum exceeds $250 or more in a year. For contributions of $250 or more, a single acknowledgment, or annual summary, may be used to substantiate the contributions.

Fair Market Value of $501 - $5,000:
If the combined value of noncash charitable contributions exceed $500 for the year, you must complete federal Form 8283 and attach it to your tax return. In addition to the aforementioned requirements, you must include:

1. How the property was obtained (purchase, gift, etc.)
2. The approximate date the property was obtained
3. The cost or tax basis of the property

Note that if your donations fall under this category, you will only need to complete section A of federal Form 8283.

Fair Market Value of $5,001 or more:
If you donate an item (or a group of similar items) worth more than $5,000, you will need to obtain an appraisal from a qualified appraiser. The IRS deems a qualified appraiser as an individual who has earned a designation from a professional appraiser organization or has otherwise met minimum education and expereince requirements. An appraisal will be triggered whether you donate a single piece of property or several “similar items” that have a value greater than $5,000.

For example, let’s say you donate used furniture that includes a bedroom set valued at $2,500, a living room set valued at $2,000, and a dining room set valued at $1,000. Since the items of property are of the same generic category, you will be required to obtain an appraisal to satisfy substantiation requirements. This rule also applies if you donate your items to different charities during the course of the year.

In addition to completing section A of federal Form 8283, you must complete section B. Please be aware that both the appraiser and donee are required to sign this form.

As you can see, it is essential to keep good records and obtain sufficient documentation when making noncash donations. Don’t risk losing your deductions: Follow the proper guidelines to help ensure you maximize your deductions on your next annual return.

We want to hear from you! We encourage you to comment below on this blog post, share it on social media or contact Joseph Mikolay III at jmikolay@cohencpa.com or a member of your service team for further discussion.

Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.