Home > Finance > Spring cleaning can affect your taxes. Yes, here’s how!

Spring cleaning can affect your taxes. Yes, here’s how!

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. Here’s a list of organizations qualified by the IRS.

Donating is good on the soul & the pocket
Donating is good on the soul & the pocket

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.

Calculate your donation's value carefully
Calculate your donation’s value carefully

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!

 

About the author

Jordan Greer is a 28 year old entrepreneur and a former Business Developer. With an insatiable appetite for the good life, keeps himself current on topics related to technology, gaming and his first love, food. He shares his views in his blog posts hoping to provide valuable information to entrepreneurs like himself who wish to establish a successful business.

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  • AB Liandro

    Good info to know

  • TacklingOurDebt

    I think this is a tip that a lot of people tend to forget about when they are clearing items out of their home. I know I do. When we clear out certain items we take them to drop off boxes for Goodwill but never think about taking them and getting a receipt for donations. We will have to consider that next time.

  • sparsameLady

    I routinely clean set aside a large plastic bin for collecting small items that I do not need anymore. when the bin is full, I make a list and off to the thrift store we go to donate. My main time to donate is in December because any donation will count towards taxes for that year. But the bin in the closet of the guest room is a convenient way to collect items throughout the year.

  • Richard Harer

    Awesome!! I better get doing my spring cleaning. just what i needed. This is a one of those good reason in doing spring cleaning. Great idea and a wonderful post! Thank you for sharing!

  • JoanneGreco

    Excellent tips! Donating is a wonderful way to help others, but getting a tax break is a good incentive to keep records.

  • Great advice. I go through my house and donate things every few months, but I’ve never thought to keep track and use it as a tax deduction.

  • I started using the Its Deductible app last year. It really makes it easier to track my donations.

  • Katherine Bartlett

    These are great tips. I always donate