Consumer Blog

When we think of giving to charity, our minds may immediately go to monetary donations — 56% of Americans donated to a charitable organization in 2021, giving an average of $547. We can also give our time: many of us may volunteer with a local religious organization, soup kitchen, or animal shelter, and find our time spent with those in need to be incredibly gratifying.

But there’s another kind of giving back that can have a lasting positive impact — giving away gently-used items that we no longer want. This can include clothing, shoes, furniture, appliances, exercise equipment, and so much more. In other words, “giving back” can take many different forms, so if you don’t have a monetary donation in your budget right now, it’s the perfect time to clean out your closet and see how your unwanted items can make a difference — for those in need, and for yourself!

Where Should You Donate?

 It’s likely that you’ve donated items before — perhaps there’s a local church or charity that you’ve taken things to in the past. If you’re donating clothing, it’s easy to pop a few bags in the car and drop off the donation yourself.  But what if you have something larger to donate, like a piano or an armoire? National organizations including Goodwill, Salvation Army, AMVETS National Service Foundation and Habitat for Humanity all offer pick-up services for furniture if in good condition. Local non-profits may offer pick-up services, too, so if you know of an organization in your area, it’s worth giving them a call to ask. Just note that pick-ups need to be scheduled in advance — sometimes weeks in advance, as many organizations may only have one truck that they use for all pick-ups and deliveries.

You can also opt to donate hyper-locally and give directly to a person or family in need. For example, you may know of a family that recently lost their home to a fire, or there may be refugees in your community who are just assembling the building blocks of a new life and would be grateful for anything that could help them establish a new home. Before you go the hyper-local route, however, consider whether you’re looking for a tax deduction from your donation — only donations made to organizations that are qualified 501c3 non-profits will qualify for a tax deduction. Which brings us to…

What Qualifies for a Tax Deduction?

Maybe over the years when you’ve donated, you’ve heard someone say, “Don’t forget your receipt for the tax deduction!” But what does that mean, exactly? The value of a donation to a qualified non-profit organization is tax-deductible that calendar year. Unfortunately, any donations you make directly to people in need aren’t deductible — but that doesn’t mean those donations aren’t worthwhile. Far from it! In fact, given recent changes to the tax code, most people aren’t itemizing their tax returns.  And if you don’t itemize charitable deductions don’t save you money.

In 2023, the “standard deduction” that people are allowed to take on their taxes is $13,850 for single filers and $27,700 for couples. You’d need to have more than that amount in itemized deductions (including other deductions like qualifying medical expenses or mortgage interest) for the year in order to make it worthwhile for you to itemize your charitable contributions.  Most of us won’t come close to topping those dollar amounts.

And no, your donations of a few bags of clothing and some used furniture won’t get you there, because even though you might think that beloved couch you’re donating is worth $10,000, the IRS says it’s only worth between $40 and $400, — or what it calls “fair market value.” (The IRS has the whole formula for exactly how much you can claim for each item you donate.) But for those of us who have several itemized deductions to make, it may make financial sense to lump them into a single calendar year. This strategy is called “batching,” you can read about it HERE.

That’s because by “batching” donations — “lumping together several charitable donations into a single tax year, rather than spreading them out over multiple tax years,” our individualized deductions can top the standard deduction, explains Will Brennan, a certified financial planner at Park Hill Financial Planning & Investment Management. So, for example, if you know you’ll have a year where you could combine several tax deductions (perhaps with a big medical expense, mortgage interest, etc.) then you can plan to itemize — which means you’ll need to carefully note all of the donations you make to charity and keep all your receipts when you do so. Which brings us to…

Receipts: What Counts, What Doesn’t?

If you’re going to itemize your deductions, the IRS will require proof of the donations you make to qualified 501c3 charities. The receipt should reflect the organization’s name, address, and the dollar amount given. Receipts are not required for gifts under $250, which means that you can use donation boxes or make a drop-off to an unstaffed building for any items worth less than $250. For anything over $250, that won’t fly — you need a receipt. And, once the total value of your non-cash donations tops $500, you’ll also need to file IRS Form 8283 with your tax return, Brennan says. Finally, if you’re donating property, furniture, art, collectibles, or antiques that are valued over $5,000, you must also have a written expert appraisal to go with the donation that describes the item’s history and worth. “Be aware of the rules for high-value items, and what type of form needs to be filed,” says Sue Gardiner, a certified financial planner at South County Wealth Planning in Rhode Island. For example, you’ll need Form 1098-C if you’re donating motor vehicles or boats, she says.

Once you know you’re planning to itemize your deductions for the year, chat with your tax preparer to let them know. They can advise you on everything you’ll need to retain, and best practices to ensure you qualify for the biggest deduction possible, with the least amount of hassle.

That Feel-Good Feeling When You Donate

If cleaning out your closet seems like a chore, consider this: donating your unwanted items isn’t just a great way to help people in need — it’s also a great way to give yourself an emotional boost! There’s a documented happiness boost we get when we help others, explains certified financial planner Jennifer Luzzatto, president of Summit Financial Partners. Giving back increases our endorphins and our self-confidence, Luzzatto says — and the positive effects can be even greater when we get our whole family in on the action. “This is especially good for children because their parents are not only modeling giving, but they’re also inspiring them to think about the life situations of others,” Luzzatto says. In other words, it’s not just your closet that needs a good clean-out — it’s time to check the toy box and the basement, too!

from our partnership with HerMoney/Filene