Ah, spring cleaning. No wonder I don’t see any smiles when I talk about. It can be a real pain. All those things that you need to discard, but in your heart, don’t really want to. It can be hard to part with things, like your old G.I. Joe figurine with a broken arm (lost in battle when you were 8 years old, so honorable), or that tweed jacket that you wore on your first date (sure, you got horribly rejected and the night ended in tears, but it was your first step into the disappointment that is adulthood- a valuable memory, that).
What do you usually do during spring cleaning? I bet you just put all the stuff in a garbage bag and dump it out. If you do that, I have some earth-shattering news for you. Did you know that you can use these things to lower your taxes? So you know that charity goes a long way to reduce your tax liabilities? All you have to do is give the items you just put into a garbage bag to a charitable organization. Want to know more about this? Well then, read on:
1. Choose the right charitable organization
Don’t just go to any place you find on the internet. The place you choose has got to be IRS-qualified. I, personally, know of goodwill. There are others like it that you need to go to, otherwise forget about the deduction on your taxes.
2. Keep detailed records
Keep the bills for everything that you’re donating because with the help of that, you will be able to assign a fair market value to the item, a step which I will explain in the next pointer. As in all deductions, documentation is key. Once you donate, also get a receipt from the charitable organization. This will help the record-keepers at the IRS so that you don’t get into trouble later. If taking care of documentation is a problem for you, I suggest you take the help of tax experts.
3. Fair market value
This means that you have to determine the value of the clothing that you are giving away. A fair way would be to start with 25 per cent of the original cost. There is no strict guideline for this but you can’t get away with just about anything. The keyword here is “fair”. If you assign an arbitrary figure, or a figure that is higher than the original price of the item, you will get hauled up by the IRS. You can use this IRS publication as a guideline.
4. Yes, there’s a limit
If you think you can write off all your tax liabilities through this benefit, you’d be so wrong. You can only donate up to 50 percent of your adjusted gross income. And if the contribution is more than $500 in value, you have to attach this form along with your returns. A larger donation will need an appraisal from a qualified appraiser along with an appraisal summary, the value for which is more than $5000. But, donations of a large amount can also be carried over so you can use them in the next financial year for tax benefits. Yay!
Make good use of tax advantages like these that are only there to help you out. Being charitable will make you feel good. Spring-cleaning will help you clear out the clutter from your home. And you also save on taxes! It’s a win-win situation for everybody!
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