What this line means
The fair market value of the donated property on the date of the contribution. Fair market value is the price a willing buyer would pay a willing seller, with both having reasonable knowledge of the relevant facts. For clothing and household items, this is the thrift store or resale value, not what you paid for the item new. For securities, this is the market price on the date of donation.
Does this apply to you?
- You donated property to charity and need to determine its value for the deduction
- You donated clothing, furniture, or household items and need the resale value
- You donated publicly traded securities and need the market value on the donation date
- You need to value items worth $5,000 or less without a formal appraisal
Easy to overlook
Thrift store value is the standard for used clothing and household items A shirt you bought for $80 has a fair market value of $5 to $15 at a thrift store. The IRS expects used items to be valued at what they would sell for in their current condition at a consignment shop or thrift store, not at the original retail price. Valuation guides from organizations like Goodwill and the Salvation Army provide reasonable ranges. 1 IRS Publication 561 — Determining the Value of Donated Property
Publicly traded securities use the average of high and low on the donation date For stocks traded on an exchange, fair market value is the average of the highest and lowest selling prices on the date you donated the shares. If the donation date falls on a weekend or holiday, use the average of the last trading day before and the first trading day after the donation date. Brokerage statements confirm this value. 2 IRS Publication 561 — Publicly traded securities valuation
Watch out for this
Claiming original retail prices as fair market value for used items. The IRS flags noncash donation deductions where the claimed value is disproportionate to the type and condition of property. A bag of used clothing valued at $500 draws scrutiny. Use realistic thrift-store prices. Overvaluation can trigger a 20% accuracy penalty on top of the disallowed deduction.
Footnotes
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IRS Publication 561, Determining the Value of Donated Property, Household Items. https://www.irs.gov/pub/irs-pdf/p561.pdf ↩
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IRS Publication 561, Determining the Value of Donated Property, Stocks and Bonds. https://www.irs.gov/pub/irs-pdf/p561.pdf ↩