Fall is here and the leaves are beginning to turn from green to red and yellow. That means it’s time to break out your fall wardrobe of sweaters and jackets. But before you put away the summer clothes, take a long hard look at your closet. Are there things that you rarely (or never) wear?
Things that are outdated or faded and limp or that no longer fit? Don’t pack them away for next spring, give them to charity now. That way someone else will enjoy them and you’ll get a big fat tax deduction for 2012.
The limits for how much you can donate to charity don’t affect many of us. The deduction is limited to 50% of your income, and donations of property to certain organizations, such as veterans’ organizations, fraternal societies, nonprofit cemeteries, and certain private non-operating foundations, or to be used by an organization, are limited to 30% of your income. Unless the stuff in your closets is really, really valuable, those limitations probably won’t impact you.
To get a tax deduction for donations, you must itemize your deductions. That means your eligible tax deductions, must exceed the IRS standard deduction (in 2012, $5,950 if you are single, $11,900 if married, and $8,700 if head of household).
This could be a plus since you have a way to increase your tax deductions greater than the standard deduction and get a bigger tax refund by donating to charity.
To take a deduction for property donated, it must be in usable condition, and you must establish its fair value. For most clothing and household goods, that’s the thrift shop value. You can use TurboTax ItsDeductible to determine the value for most household items. You’ll also need a signed receipt that proves you made the donation.
Maybe you, like me, are in need of a new car. With interest rates at historic lows and auto dealerships anxious to make a sale, the fall is an ideal time to shop. If the dealer won’t give you much for your car, consider donating it to charity.
Your deduction is limited to the amount that the charity gets when it sells the vehicle, but you will still be able to increase your tax deductions and your tax refund through giving.