Taxpayers determine the IRS tax deduction value of non-cash donations by assessing the fair market value of the property, reports the IRS. Proof of fair market value varies depending on the type of property and what it is worth. Special donation value rules apply to vehicles, advises Nolo.Continue Reading
Fair market value is the amount a willing buyer would pay a willing seller for an item or piece of property on the open market, explains the IRS. Taxpayers determine the fair market value of donated goods using various means, including the cost to the donor if purchased recently, the sale prices of similar items, the cost to replace the item and the opinion of experts. For non-cash items under $5,000, the taxpayer can generally determine the value, but a qualified professional appraiser must assess the value of any property donations worth $5,000 or more, advises Nolo. Taxpayers can only deduct the value of donations of household items and clothing that are in good used condition or better.
The IRS only allows taxpayers who donate vehicles to charities to deduct the price that the charity gets when reselling the vehicle, according to Nolo. As an exception, a donor may estimate a fair market value deduction of $500 or less for a vehicle. Additionally, a donor may estimate the fair market value of a vehicle if the charity uses the vehicle instead of selling it, works on the vehicle to improve it, or donates or sells the vehicle to a needy person.Learn more about Business & Finance