Closets Could Hold Next Year’s Tax Deductions

Although the tax season has come to a close, spring cleaning season is upon us and opening closets exposes charitable tax deductions for next year.

Old clothes, teddy bears, sneakers and luggage can take up needed closet space but the savvy taxpayer can turn that unwanted clutter into cash through tax deductions.

The Internal Revenue Service requires taxpayers to request proof of all charitable tax deductions of more than $250. The donor is responsible for making a “good faith” estimate of the value of the goods. The charity is not required to put a value on any items.

But guessing the value of such items can be tricky.

When items are overstated in value the taxpayer risks an audit, penalties and interest. If they are underestimated, taxpayers may pay more taxes than necessary.

“We suggest by shopping at (a Goodwill) store they can get an idea of the range of the second hand market,” said Alexis Upham, director of development for Goodwill Industries-Manasota Inc.

Bill Lewis, a certified public accountant with Client Valuation Services in Lincoln, Neb., wrote a 52-page booklet called “Cash - For Your Used Clothing.” The booklet lists values for 600 commonly donated household items and clothing.

Lewis assures taxpayers who itemize that they will save at least $200 on their tax bill or their money back.

“Many people stuff a bunch of old clothes into bags or boxes and claim a $100 deduction,” Lewis said. “Those clothes could easily have been worth $1,000, if they only knew the proper method for valuing their donations.”