The idea of moving during December is often met with skepticism, and for good reasons too. The hustle of hauling your belongings to a new apartment, finding a storage unit, remembering how your bed frame fits together – it all adds up to an already busy holiday schedule. However, this same stressful time can be used as an opportunity to de-clutter your life and do some good by donating to charity, which comes with its own perks.
One such advantage is the tax deduction you receive for donations made to registered 501(c)(3) charities like Goodwill. But before you rush off to make your donation, a word of caution: Not every thrift store falls under this category. To ensure that your hard-earned donations will help you reduce your taxes, call the store ahead to confirm whether they accept tax-deductible donations. You can find more information on qualified organizations at the IRS website.
To claim your deduction, it’s vital to keep a detailed list of what you’ve donated in case the IRS comes knocking on your door. The fair market value of each item should be estimated – it won’t be the same as what you originally paid for them. For example, if you donate an old pair of jeans worth $40 but were never worn, its fair market value might be anywhere between $3 to $10.
When estimating values, a walk around a thrift store could prove helpful in understanding how items are priced. Moreover, make sure your donations aren’t of broken or unrepairable items. The charity shouldn’t have the added burden of handling useless junk just for the sake of your tax deduction.
Lastly, always keep that receipt from the charity you donated to. You can’t claim your deduction without it. For amounts exceeding $500, complete section A of Form 8238; if one item is worth more than $5,000, follow Section B of the same form.
Taking a day to declutter and donating before the year-end can give you a head start on the new year with less clutter and taxes.
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