Get a Tax Break with Your Used Clothing

Posted on February 19, 2013 by Mary Hunt in Home & Family 11 Comments

If you itemize your tax return you are in a perfect position to pick up some extra dough.

You do know that you are allowed to deduct the fair market value of items you donate to qualified charitable organizations, right? And you probably don’t do a very good job of that because how on earth are you supposed to know the fair market value of those shoes or that bag of clothes? Not to mention that computer, lamp or other household appliance.

MFUC

Most people stuff a bunch of clothes into bags, drop them off at a collection center and claim a $100 deduction. But those clothes could easily have been worth $1,500 or more if you only knew how to value them. And the values add up quickly. 

Books, even magazines, can be donated to libraries or churches and properly valued. The law does not allow the charity to set the value of an item. You, the donor and taxpayer, must do that. But how much should you claim?

If you overstate the value you risk an audit, penalties and interest. If you underestimate, you will pay more taxes than you should.

Here are some examples of what donated items are worth, assuming “Good” condition:

Women’s dress: $12

Men’s suit: $23

Boys’ jeans: $4

Luggage set: $20

Stove: $30

See what I mean? It can really add up fast.

In his booklet, Money for Your Used Clothing: Tax Year 2012, Certified Public Accountant William R. Lewis comes to the rescue of uncertain taxpayers. The booklet lists values for more than 700 items of clothing and household goods commonly donated to charity. The values are obtained from annual surveys of consignment and thrift stores that Lewis and his staff perform in all areas of the U.S., conforming to IRS requirements for donated items.

Lewis produces a new and updated version of this booklet every single year to reflect true values for the current tax year. And Lewis guarantees his work. If the IRS disallows the deduction, he will personally pay any interest and penalties. By using Money for Your Used Clothing, Lewis estimates clients (thousands of them are in our own Everyday Cheapskate family) have saved more than $15 million in taxes that would have otherwise lined the pockets of Uncle Sam. That’s a pile of allowable deductions.

Money for Your Used Clothing addresses recent tax law changes and guidelines for tax year 2012. It retails for $25, but because I believe this is such a valuable tool, I’ve negotiated a special price of just $20 for my Everyday Cheapskate readers. (Plus $2.53 for USPS media mail shipping which may take up to two weeks for delivery. Check our bookstore or call our office for priority mail shipping rates.)

To order, visit our bookstore ; call 800-550-3502; or mail your $22.53 check to Everyday Cheapskate, Dept. Money Book, PO Box 2099, Cypress, Ca 90630. To receive your booklet faster, call our office at 800-550-3502 and ask for priority shipping rates.

Question: It’s seven weeks until tax day. Are you ready? Join the conversation here. 

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Posted on February 19, 2013 by Mary Hunt in Home & Family 11 Comments
  • Vicki

    I’m a tax preparer. Every year we hear this about donations. Taking a large amount in these types of deductions is a HUGE red flag to the IRS. You are limited to $250 in deductions unless you keep receipts on everything. You need purchase receipts that are dated and you will need very organized records, even photos are recommended. I’ve read this book, I think it is very misleading. People think they can take hundreds of dollars in deductions for old clothes…it’s not worth the risk.

    • http://twitter.com/DebtProofLiving Mary Hunt

      Vicki … Could you give us a link to the IRS that outlines this $250 limitation you mention? I believe that you are incorrect, and ask that you recheck your information.

      My understanding is that “to claim a deduction for contributions of cash or property equaling $250 or more, you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash, a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift.”

      That is not at all the same as a non-cash donation of used clothing. See my comment above with a link to the IRS site that outlines the $500 threshold over which you must complete an IRS Form (which by the way is not at all difficult!)

      I have used “Money for Your Used Clothing” for many years and highly recommend it. I have countless testimonials from DPL fans and readers who have used it as well and saved many thousands in taxes. So far I have not had feedback from anyone who used the book to determine their allowed deductions who was audited, question or in any way needed to answer for the action they took. That is just how reliable this book and the system is offers can be.

    • Merimcc

      I am also a tax preparer. I have used this book in the past and it is an excellent method of determining non-cash donations. The last I heard, you have to have receipts on ALL donations, cash or non-cash. The clothes and used items donated do have to be in good condition to deduct them from your taxes.

    • http://www.facebook.com/melisa.haessler Melisa Haessler

      Bill Lewis office showed us years ago how to utilize the deductions of donated items. I gather all the items, inventory them, rate them, photo them then attach them to the book and include it with our return. It is far easier that setting up a garage sale for only a few dollars and many hours of time. We have used this book for many years and it has save us many dollars. I strongly recommend this book for anyone who donates items every year. the cost of the book is well worth it!!! we have never been audited for our donated items.

  • http://twitter.com/DebtProofLiving Mary Hunt

    According to the IRS, “If your total deduction for all noncash contributions for the year is more than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.”

    The best way to make sure you have the proper information for this form is to use a certified guide like “Money For Your Used Clothing.” If you donate and do not take a market-value deduction as allowed, you’re leaving money on the table! Please do not be intimidated from paying as little tax as legally allowable. Here is a link to a handy guide from the IRS: http://www.irs.gov/uac/Deducting-Charitable-Contributions:-Eight-Essentials

  • Jean

    I don’t do my own taxes. I’ve had an accountant prepare my taxes for years. She has saved me thousands of dollars. But that’s beside the point. What she does like is when I show up with my values and charitable receipts in hand. In this day and age, every deduction counts. If the IRS is going to allow me to deduct my contributions, then I’m going to do it.

    I love this booklet. I haven’t purchased it every year, but most years. Actually, my accountant likes the fact that the company is willing to back up their information. It’s guaranteed. The free stuff on the Internet is good information, but it’s not guaranteed nor will the Salvation Army pay my fees and penalties if the IRS doesn’t allow a value.

    I figure that deductions are a gamble. But that having protection goes in my favor. And for 20 bucks it’s totally worth it. I hope Mary keeps stocking this booklet.

  • Y Morgan

    I just bought the book and plan to use it with this year’s taxes. I have for years tried to do my best a valuing my donations to GoodWill. This year I’m looking forward to having this guide.

  • Dale

    We have an accountant prepare our tax returns each year and have been using the Money For Your Used Clothing booklet for many years, with our accountant’s blessing. I have always understood it to be completely within IRS regulations, otherwise, I‘m sure my accountant would not recommend using this method of valuing donated items. The MFYUC booklet makes it easier to document and value our donated items each year, thereby reducing our tax liability by several hundred dollars. And we get to help others by donating to charitable organizations. The booklet pays for itself many times over each year.

  • Carole C

    We love the MONEY For Your Used Clothing book which has saved us hundreds of dollars on our annual income taxes. My tax preparer has told all his clients about it. It is an invaluable resource every year!

  • George S.

    We have been using this book for many years and must say that I actually feel more protected by the methodical guidelines and pricing methods they use for valuations. My tax preparer also tells his clients about it and we plan on using this excellent resource for years to come! In this economy, every dollar counts…thanks to MONEY for Your Used Clothing book we are able to donate to charities and save $$$ on our taxes!

  • Chad

    I have also used this book for several years. I wouldn’t have any clue as to what value to put on items. I’ve done the, put it all in the bag and say it’s $100, no more! If you itemize each item and keep track of everything that you give to charity, it adds up faster than you think.