NEW YORK (MainStreet) — Although it may be tempting to fudge on that blank form you're given when you make a charitable donation, your $3 sweater just isn't worth $50 — and the IRS knows it. If you're claiming charitable deductions on your taxes this year, here's a look at how to do it by the book.
Pricing/valuation guides are readily available.
Just because you paid $1,000 for a suit doesn't mean it's worth that when you donate it, says Ken Kamen, president at Mercadien Asset Management.
If you've never been to a thrift shop or don't know what a fair market value for an item may be, Salvation Army and Goodwill have charts showing average retail prices. At Salvation Army, pants and blouses range in value from $2 to $8, and at Goodwill, books are priced from $1 to $3. Even if you're donating to a different charity, these price charts offer a good general guide, Kamen says.
It comes down to fair market value — what someone would willingly pay for the item, says Kay Bell, contributing tax editor for BankRate.com.
"You may think something is worth $50, but stop by a thrift store and just see what similar items are being sold for. You'll be stunned how inexpensive nice things are. Unless you have a Chanel outfit that was worn to a presidential inauguration, it's not going to appreciate in value."
If you have a rare or historically significant piece of clothing, it should be separately appraised.