The benefits of making a donation to Goodwill aren't limited to feeling good about helping others in need and reducing the clutter in your closet: The Internal Revenue Service may also reward your generosity with a tax deduction.
However, to get the deduction, you need to know how to value your donation and what records you need to keep in case the IRS audits your return. To properly prepare for and submit the information for a Goodwill donation tax deduction, follow a few simple steps each time you donate to make sure you have your paperwork in order.
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Valuing Your Donation
When you donate cash to a charity, it's easy to tell how much you get to deduct on your taxes. With gifts of goods or property, such as clothing, household appliances or games you don't play any more, you're allowed to deduct the fair market value, which the IRS defines as the price a willing buyer would pay and a willing seller would accept.
Usually, that's substantially lower than the new price and more like the price you pay at a thrift store. To help you get an idea of what your donations might be worth, some charities, including Goodwill, publish a pricing guide. You can also check sites like eBay and Craigslist to see what your items are worth.
When you make your donation, you should receive a slip of paper from Goodwill with a donation receipt ID number on it. You can then visit the Goodwill website at GWDonate.org and fill record your donation. You'll enter your receipt number, then list the items you have donated and enter a donation value amount. You'll have the opportunity to go back and change your values at a later time, so it's important to keep your receipt and ID number.
Limits on Donations
The limitations on how much you can write off on your taxes for charitable contributions are based on whether you are making a cash contribution or non-cash donation, and what your income is – your cash contribution deductions are limited to a percentage of your adjusted gross income. The amounts can change from year to year, especially as Congress makes changes to charitable contributions and other deductions during the COVID-19 pandemic.
To claim the charitable donation deduction for non-cash donations, you must itemize your deductions, which means your total deductions must exceed the standard deduction you are entitled to. On the other hand, you can currently take your standard deduction and claim as much as $300 (doubled if married filing jointly) in qualified cash donations for the 2021 tax year.
Refer to the latest version of IRS Form 8283 to learn the limits on non-cash charitable deductions, including your Goodwill tax deduction. Goodwill's Central Coast location also provides information about taking a deduction for items you donate at on the Claim a Tax Deduction page of its website. The page also provides some sample Goodwill donation price lists to guide your valuations.
Documenting Goodwill Donations
If you donate less than $250 of goods and it's not practical to get a receipt, the IRS doesn't require a formal record from Goodwill before you can claim the deduction. But, you do need to keep your own records of what you gave.
For example, if you leave $100 worth of used clothing at a drop box, you're excused from getting a receipt but should keep a list of what you dropped off. Otherwise, you need a written record from Goodwill showing what you donated and when you donated it.
Tax Reporting Issues
When you file your taxes with Form 1040, the process for taking your deduction will vary, based on whether you're itemizing or taking the standard deduction for cash vs. other donations. You don't have to include any of your receipts or other records with your tax return, but should keep them in the event you're audited.