If you have made a charitable donation during the tax year, you want to make sure that you claim it on your taxes. The Internal Revenue Service (IRS) allows taxpayers to claim charitable donations as tax write-offs. This is an excellent, and legal, way to lower your taxes due come tax day.
In order to claim a donation on your taxes, you must have made the donation to an organization that is eligible for tax deductible donations. This is sometimes referred to as the organization having tax exempt status. Typically all non-profit organizations meets this qualification. And usually all national charities, like the Make-A-Wish Foundation, are eligible for tax deductible donations.
If you have made a donation to a local charity though, you may not know their tax exempt status. Luckily, you can check it out on the IRS website.
It is a good idea to check the charity status (link opens in new window) on the IRS website before you make the donation, in the event that you have chosen a place that is not eligible for tax deductible donations.
If you have made your donation to a charity that is eligible for tax deductible donations, you must itemize your deductions. You have to use Form 1040 when you file your taxes. And you must also fill out Schedule A for the deduction.
Fair market value, or FMV, is commonly used as the value of donated goods and items.
The Internal Revenue Service (IRS) defines fair market value as the price that you would be able to sell an item for in the current market, assuming that the seller is not desperate for the sale and the buyer is not desperate to own the item.
It is safe to say that most of the time the FMV of an item will be considerably lower than the price that was paid for the item. Instances when this may not be true could be with antique cars and real estate.
Determining fair market value of an item depends on what the item is.
There is no set or approved way to determine fair market value. Sometimes you can use a variety of methods and just take the average.
For example, to get the FMV of a car you can check Kelley Blue Book, eBay Motors, Cars.com, local used car lots and your local newspaper classified ads. You can end up with a range of different values from those places. This is when you would just use the average of all of those values as the fair market value of the vehicle.
If you can’t recall how to get the average, just add together all of the value that you have. Then take that number and divide it by the total number of values that you started with. The end result of that calculation is the average.