How do I determine the value of noncash charitable contributions?
To claim a deduction for noncash charitable contributions, you must determine the fair market value (FMV) of the donated property on the date of the donation. The FMV is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of relevant facts.
Key Steps to Determine Value
- Identify the type of property: The valuation method depends on whether the property is cash, personal use items, art, collectibles, or business property.
- Use FMV guidelines: For most noncash donations, FMV is based on what a willing buyer would pay in an open market. For example, if you donate an installment note with an FMV of $10,000, that is the value you report.
- Consider special rules for certain items:
- Art and collectibles valued over $5,000 require a qualified appraisal and Form 8283.
- Property used in a trade or business may be treated as partly ordinary income and partly capital gain property.
Substantiation Requirements
You must provide documentation to support your deduction. The required documents depend on the value and type of property donated:
- Contemporaneous Written Acknowledgment (CWA): Required for all noncash donations.
- Form 8283: Required if the total value of noncash donations exceeds $500 in a year. For donations over $5,000, a qualified appraisal is also required.
- Qualified Appraisal: Must be completed by a qualified appraiser for donations over $5,000.
Reporting on Tax Return
Report noncash charitable contributions on Schedule A (Form 1040), line 12. The deduction is subject to the 50% of adjusted gross income (AGI) limitation. If you donate property through a partnership, the partnership must provide you with Form 8283, which you attach to your return.
Source:
Publication 526 - Charitable Contributions
Publication 561 - Determining the Value of Donated Property
Instructions for Form 8283 - Noncash Charitable Contributions
Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions.