When claiming a charitable deduction for noncash property valued at more than $5,000, specific substantiation requirements apply under IRS rules. These requirements are designed to ensure that deductions are based on accurate valuations and are supported by proper documentation.
Requirements for Deductions Over $5,000
- Qualified Appraisal: You must obtain a qualified appraisal from a qualified appraiser. This appraisal must be completed before filing your tax return and must include the fair market value (FMV) of the donated property as of the valuation date.
- Form 8283: You must complete and attach Form 8283, Section B, to your tax return. This form includes details about the donated property, the charitable organization, and the appraiser.
- Contemporaneous Written Acknowledgment (CWA): You must also obtain a CWA from the charitable organization, which confirms receipt of the donation and its value (if applicable).
Exceptions to Appraisal Requirements
- Publicly Traded Securities: No appraisal is required if the donated property consists of publicly traded securities with readily available market quotations (e.g., stocks listed on a major exchange).
- Vehicles, Boats, or Airplanes: If you donate a vehicle and obtain a CWA meeting IRS requirements, an appraisal is not required. However, if your deduction exceeds $5,000, you may still need an appraisal depending on the circumstances.
- Inventory or Intellectual Property: No appraisal is required for donations of inventory or certain intellectual property (e.g., patents).
- Property Valued Under $5,000: No appraisal is required for donations valued at less than $5,000, unless the item is clothing or household goods not in good used condition and you claim a value over $500.
Special Rules for High-Value Donations
- Deductions Over $500,000: If you claim a deduction exceeding $500,000 for any single item or group of similar items, you must attach the qualified appraisal directly to your tax return. Failure to do so disqualifies the deduction unless due to reasonable cause and not willful neglect.
- Art Valued at $20,000 or More: For art donations valued at $20,000 or more, you must attach the qualified appraisal to Form 8283. If requested by the IRS, you must also provide a high-resolution photograph of the artwork.
Source:
Publication 561: Valuation of Donated Property
Form 8283: Noncash Charitable Contributions
Publication 526: Charitable Contributions
Disclaimer: Always verify requirements with current Federal or State Department of Revenue Forms and Instructions. Tax laws and regulations may change; consult a CPA or tax attorney for personalized advice.