Don't forget to donate -- and take that tax deduction
Bankrate.com

Each of us has occasionally felt like Homer Simpson. Confronted by some silly mistake we made, we slap our forehead and mutter "D'oh!"

But when it comes to taxes, that "D'oh!" can cost dough. Sometimes the error means we have to pay more in taxes. Other times it delays the refund we're expecting from the Internal Revenue Service.

One of the most common mistakes is overlooking your charitable good deeds. If you forget to tell the IRS about it, you could be wasting a valuable tax break. Here's how to avoid this mistake and get through tax-filing season with a fuller bank account and your good humor still intact!

Forgetting to donate unwanted items to charity
Spring cleaning is a terrific way to clear out old stuff and make way for the new. Even better, if you donate your items to certain charities, you'll be able to claim a tax deduction on next year's return.

What does this translate to in dollars? Here's an example:

For 2004, Sarah had a taxable income of $35,000, putting her into the 25 percent marginal tax bracket. She donated $500 worth of clothing and household items to Goodwill and earned a tax savings of $125 ($500 times 25 percent) on her federal income tax return.

By following these guidelines, you'll be able to join Sarah and other tax savers who receive maximum tax benefits when donating used clothing and household goods.

1. Give your items to a qualified organization -- an organization that has a tax-exempt status with the IRS. To find out if the organization is qualified:

• Ask the charity if the IRS has qualified it.
• Read the charity's literature to ensure that it is fully recognized by the IRS.
• Check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations.

2. Assign a fair market value to the items that you're donating.

• You can't claim a fair market value that is more than the original cost of that item.
• Certified Financial Planner Ken Pikor of Westerville, Ohio, who is also an enrolled agent -- someone who can represent taxpayers before all administrative levels of the IRS -- says, "If you happen to be like my wife, who saves all her clothing receipts and files them, a good rule to follow when valuating used clothing/items is to use 25 percent of the original purchase price as a guide when determining the donated value."

3. Keep a detailed record of your donated items, including:

• The number of items and the condition they're in.
• The dates you received or bought the items -- if you don't know exact dates, use approximate dates.
• The original purchase prices.
• A photo or video of the items you're donating -- this will substantiate your contribution if questions ever arise. Keep the visual record with your tax records.
• Signed and dated receipts from the organization receiving your donations -- when Goodwill asks you, "Do you want a receipt?" say "yes."

4. Report your charitable deductions on Schedule A of Form 1040.

5. The value of your charitable deductions can't be more than 50 percent of your adjusted gross income in any single year. Donations exceeding the 50 percent limit can be carried forward to future years.

6. When you donate more than $500 worth of goods to charity, you must include Form 8283, Noncash Charitable Contributions, with your tax return.

7. If your claimed deduction is more than $5,000, you must get an appraisal from a qualified appraiser and attach an appraisal summary (Section B of Form 8283) to your tax return. A qualified appraiser is someone authorized to complete Part III, Declaration of Appraiser, of Section B.

-- Updated Nov. 19, 2004