Gifts to Charity Part Four

Form 8283 is entitled “Noncash Charitable Contributions” and is required if your contributions meet certain thresholds in one year.

Clothing and household items you donate have to be in at least good condition before a donation deduction is allowed.  And if your total noncash gifts are more than $500, this form is required.  Fair market value is generally used to calculate your total noncash donations. 

Sometimes you will have to reduce the amount you claim to lower than fair market value.  To see what the rules are, we need to determine if the property type is ordinary income or capital gain property.

Ordinary income property would result in ordinary income or a short-term capital gain if it was sold on the contribution date.  If the property would result in long-term capital gain on date of donation, it is capital gain property.  To be a capital gain property, it must be held for more than one year. 

The deduction for a gift of ordinary income property is limited to the fair market value less the amount of short-term capital gain if the property were sold.  This is just one reduction example.  Form 8283 instructions list all the fair market value reductions for other types of rarely contributed items. 

If you donate a vehicle, you must attach a statement from the organization if the donation is more than $500.  Basically, the vehicle must be sold within 30 days of the donation date to an unrelated third party.  If the vehicle is sold for more than the fair market value, you may only claim the smaller of the fair market value or sale proceeds.   Again, as is usually the case in tax matters, there are a number of exceptions to this rule.

The sections of form 8283 you are required to fill out vary according to the type of donated property you contributed.  If you are going to make a large contribution, check the rules first to ensure the deductibility of your donation.