Dear Client:
If you donate clothing or household goods to charity, there’s an IRS trap you need to know about.
In a recent Tax Court case, a taxpayer lost a $6,760 charitable deduction—not because the donations were improper, but because his documentation failed to meet strict technical requirements. The court didn’t question his generosity. It denied the deduction because the receipts and Form 8283 were incomplete.
Here’s the key issue: For non-cash donations over $250, you must obtain a contemporaneous written acknowledgment from the charity. For donations over $500, you must also maintain detailed records showing what you donated, when you acquired the items, and their cost or basis. Form 8283 must be completed accurately, including donation dates and fair market values.
Generic receipts that say “miscellaneous household items” are not enough. And once an audit begins, you cannot fix missing documentation afterward. The deduction is simply lost.
The safest approach is proactive. Before donating, prepare a detailed list of items, including descriptions and estimated values; take photographs; and provide the list to the charity so it can reference the list in its acknowledgment. Keep all supporting records with your tax files.
The bottom line: Good intentions are not sufficient. With charitable deductions, documentation is everything.
If you want to discuss donations of clothing and household goods, please call me directly at 919-372-5731.
Sincerely,
Twila Wilt CPA