We all know that you can sell your clothes at a garage sale, on eBay, or to a secondhand shop like Plato’s Closet. If you’re like me, you aren’t stylish enough to command any amount of money that would be worth your time, so you’ll probably just want to donate the clothes.
Donating clothes is a great way to help out the needy, get a little bit of money in a tax write off, and most importantly, get rid of a bunch of crap that you don’t need.
Will Donating Clothes Give Me a Tax Break?
The most important thing to know about donating clothes to charity is that you will only receive a tax break if you are going to itemize your deductions. If you don’t know what itemizing your deductions means, here is a quick explanation.
The IRS code makes it difficult to ascertain these days, but you need at least worth of itemizable deductions to get any tax benefits. So, you’re going to need a lot of charitable donations, mortgage interest, or additional taxes (property, state, local) to qualify. (note: Unfortunately “itemizable” isn’t a word, which is a travesty. Someone get Webster on the phone for me so we can fix this!)
If you’re like me and you don’t own a house or live in a state with income tax, your only option might be charitable donations. And if you’re like me, you don’t donate a ton every year to charity. Well, at least I didn’t until I came up with a master plan to double my charitable donations in one year so I donate enough to itemize, and then eliminate donations the next year. Bingo! I’m at over $6,000 in charitable donations and anything I donate above that will increase my deduction even more.
If you are not going to itemize deductions, then either save your clothes for a year when you will itemize, sell them, or just give them away and don’t worry about a tax break.
How to Value Your Donations
Valuing your donations is pretty easy; just let Goodwill or Salvation Army do it for you. Both places have guides that tell you approximately how much certain types of clothing will be worth. Of course this is just a guide, so feel free to adjust the values up or down as you see fit. The valuation should be the fair market value of the item (not the purchase price). For example, what could you have gotten if you sold it on eBay? Just remember that you are on the hook to prove the value of your items if you are audited.
It is also required that you only deduct things that are in “good condition”. Don’t donate clothes with holes in them, and for Pete’s sake just throw your old underwear away. I guaranteed the fair market value of your skid marked tighty whities is $0.00.
It’s a good idea to take pictures of each item you intend to donate and keep them saved on your computer. This will serve as proof of the item’s condition if you are audited. Also make sure to get a receipt from wherever you donate your clothes, which should also be saved and potentially included in your tax returns.
Filing Your Taxes
Once you are ready to file your taxes and take your itemized deductions, you should be aware of forms you may be required to complete. If your total donation is over $500 then you will need to fill out tax form 8283 and include a receipt from the charitable organization. If you have a lot of clothes to donate, or a few very nice/valuable items, you can pretty easily go over this threshold. Don’t be scared though, because it’s not a complicated form and Turbo Tax or your accountant will know exactly how to handle it. Just make sure you get that receipt from the charity where you donate.
If your total donation is worth over $5,000, you will need to fill out the tax form, include the receipt, and include an official appraisal of the value of the goods. Getting an official appraisal will be a PITA and makes donating your clothes more trouble than it’s worth. If you have $5,000 worth of clothes, then pay someone to sell them on eBay for you. It will be much less hassle than donating them and you’ll make a lot more money.
I’m Saving $100 on My Taxes
I took pictures of everything, assigned each piece a value, and ended up with a $400 donation. The reason I got so high is because I’m donating three nice suits that were given to me from my uncle. They were hand-me-downs and never fit quite right, and now that I’ve bought suits that are tailored to my size, I don’t need them.
I’m in the 25% tax bracket, so a $400 deduction will save me $100. BOOYAH!
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Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
I’m looking to married-file-jointly for 2011, and it’s tough because now we have to come up with $11,400 in deductions! That’s a lot of money so who knows when we’ll be able to itemize…. Good post!
Yeah, once you get married it is a lot harder to itemize deductions. Depending on when I get married and/or buy a house, this might be the only year of my life that I get to itemize.
That’s a pretty high deduction amount and I would think would be subject to increased chance of an audit. Even though you advise keeping track of things and keeping photos, it still could lead to unexpected issues.
I typically donate a lot and probably undervalue stuff and don’t really claim more than a couple hundred dollars of ‘items’ per year. We donate cash as well which has a much easier go to prove. We have no issues itemizing because of our mortgage interest and real estate tax amounts.
Well $6,000 of my deduction will be cash donations to my church. I’m not worried about an audit because I do everything by the book, but I doubt a $400 clothing donation will raise too many red flags. The reason it’s $400 is because I’m donating 3.5 nice two-piece suits (I have three jackets and four dress pants).
We normally don’t itemize but kept donation records for last year and we tithe at our church. I now see how much donating helps. You actually make more money donating than selling your stuff at a yard sale. I never have yard sales and don’t sell anything unless it is a car. I give all of it away if I a not using it. You help others out and make a ton of money. We were able to deduct about 15K just on donations last year. I am sorting clothes out and stuff from our last baby now and taking pics and getting a spreadsheet together for next years filing.
We normally don’t itemize but kept donation records for last year and we tithe at our church. I now see how much donating helps. You actually make more money donating than selling your stuff at a yard sale. I never have yard sales and don’t sell anything unless it is a car. I give all of it away if I a not using it. You help others out and make a ton of money. We were able to deduct about 15K just on donations last year. I am sorting clothes out and stuff from our last baby now and taking pics and getting a spreadsheet together for next years filing.
I only deduct cash I give to charity. I have been giving a bunch of stuff to goodwill as I am moving and have accumulated quite a bit of stuff. I know lots of people deduct a fair amount for what they give away. It seems to me quite a few people basically just lie and don’t pay the taxes they owe based on fake claims of donations. I find it funny we even get to deduct spending just because it is a gift to something that has a label from the government that says giving them are money means we owe less taxes. It is the system we decide to use but it also just seems silly to me. I give to help others and reduce waste, pollution…
I don’t bother with the tax break on such things. I do take it for cash I give away, so… I would also be perfectly happy if we reduced the budget deficit by not reducing taxes for people that give money to places the government has decided to give tax breaks for.
I’m with you on simplifying the tax code. I would still donate even if there weren’t tax benefits, but if they are there then I might as well use them.
I do understand that some people might not find it worth their time and effort to photograph and track all their donations. To be honest, if I wasn’t writing a blog about it, I probably wouldn’t have done it either.
I don’t really understand the reasoning behind all of this (and it’s not just you, Kevin. Plenty of bloggers talk about this.)
I get a $5,700 tax deduction simply by existing. If I have clothes “worth” $5,700, I’m far better off selling them, even some of them, than stockpiling them, and donating them for a tiny tax break.
I agree with you, and I mentioned that above. If anyone is looking to get rid of $5,700 in clothes, donating is not a great way to do it.
I’m already donating $6k in cash to church this year (on top of some other charitable donations), so I’m already able to itemize. This is just another $400 of itemizing on top of that.
I agree with Dee. Unless you specifically want to donate >$6K or so to charity, this makes absolutely no sense to me as a tax strategy.
Along with exemptions, deductions are the primary way of reducing adjusted gross income to arrive at taxable income. The most likely way people can itemize deductions is by some combination of state and real estate taxes + mortgage interest + charitable. But you don’t pay state tax and you already can claim a completely legal $5700 deduction even if you never contribute a dime to charity. From a purely financial standpoint, you’ll do better not contributing to charity and just taking the standard deduction.
If you do itemize, however, see if the option to deduct Texas sales tax can help you. It was designed for people like you who don’t pay state income tax.
I’m definitely not donating money to charity for tax reasons; I’m doing it because I believe in it. It would be very dumb to donate for just tax benefits.
I will definitely use the state sales tax to help increase my itemized deductions as well. That’s a good point. I’m actually looking forward to the next tax season because I’m excited to learn all the different ways to take deductions, since it will be my first time.
Yuck … skid-mark tighty whities? Definately worth $0.
I donate to the thrift store arm of the Humane Society each year, and keep the receipts around in a manila folder somewhere.
One thing to watch out for, if you’re giving away super-donations … my parents gave $100,000 to a charity when they retired, and got hit with the “alternative minimum tax.” I don’t know a thing about it, other than the fact that it’s something high-donors ought to look out for. I would look it up and explain it to y’all … but I’m lazy tonight. 🙂
I love donating because I like knowing I am helping someone. If I can ‘t use the stuff why not let someone else. Plus I hate waste.
If I donate where I live in Canada, I don’t get a tax receipt unless I give money for a certain amount and up. Too bad we don’t get the same breaks you guys do.
I have so many clothes to donate, it’s ridiculous. I’m planning on donating, and hoping it will help out next time tax season rolls around.
We file married, so we have to hit more than $11,000 in deductions to make it worth itemizing. Our property taxes only take care of about $4000 of that, so nope, all of our Goodwill donations don’t usually net us anything except more closet space (which is awesome). I like your double-contributing system though – neat idea!
Waste Management of Los Angeles is teaming up with the Los Angeles Sparks (WNBA) for the ‘Bag your Shoes’ campaign happening now! The goal is to collect 1,000 pairs of shoes! Come down and “recycle” your shoes, see you at the game! http://youtu.be/jk1mH9JvRr0