Q&A: What's my tax deduction for donating unwanted books to charity?
QUESTION: I'll be donating more than 1,500 books to my school at their annual charity fundraiser, so it's tax-deductible. Do I need to itemize every book title? Or would "1,000 paperbacks and 500 hardcovers" suffice?
Also, I never pay more than 25 cents per book, I only do bag sales. Is the "fair market value" -- a quarter? The school will be selling them for 50 cents to $5. They want to write a decent amount on the donation slip for me.
ANSWER: I'm the wrong guy to ask. I've never had the patience to find out how charitable tax deductions work, so I give away my discards.
The last time I tried to figure out how I could claim a charitable tax deduction, I pulled out my copy of Small Time Operator and gave up after reading this:
"Sole proprietors, partnerships, LLCs and S
corporations cannot deduct charitable contributions.
Only C corporations are allowed a business deduction
for charitable contributions."
Does that mean I could give my wife the books and she could claim them as a charitable deduction on our joint return, since she's not part of my sole proprietorship business? I don't know and I just don't care enought to find out. This stuff gives me a headache.
However, for those of you who want to research this further, I found a item on "Google Answers" that addresses book donation charitable deductions. If you scroll down it has several links to further information.
If anyone wants to chime in -- anonymously if you wish -- with a comment below on how you've handled this in the past, it would be greatly appreciated.
posted by Steve Weber at 8/29/2006
11 Comments:
I believe that you can begin deducting charitable contributions once the donations have exceeded 2% of your adjusted gross income on your personal tax return. So, if you make $100,000 a year, the first $2,000 in charitable contributions won't go towards reducing your taxes. Anything above $2,000 counts towards reducing your taxes.
I am not sure how you would value your books for computing a charitable value. When I have donated in the past to thrift stores, I drop my items off and they usually mail me a receipt a few weeks later with a value they think is fair for what I donated. This is probably a good way to go with your items as well.
As a former bookstore manager for Goodwill Industries I can tell you that we allowed our resale value as a charitable deduction if the individual asked us to put a value on the donation. Otherwise, it was up to the individual to determine the value and we provided the receipt....a word of caution--in the event of an audit, the donor had the burden of proof. This applied to individuals and dealers.
While I am not an accountant, the difference between an individual and a business (dealer) donating books - and deducting a value, is that "Haven't you, when operating as a business, ALREADY deducted the full cost of your books as an expense when you purchased them? Unless you are required to carry them as Inventory (and aren't allowed to fully deduct the full cost at time/year of purchase) like a regular corporation is required to do." Individuals buying books (or anything else) typically DON'T/CAN'T deduct their cost when they purchase them, but are allowed to deduct the item's current value (usually less than the retail cost they paid) when they donate the item to a qualifying charity. Think about it.
Great point, Anonymous. If the amount you paid for your books is being fully deducted in your "Cost of Goods Sold" on the same year's Schedule C, it doesn't seem you should be able to claim *another* deduction for them -- especially in the same year. This is exactly why I get headaches thinking about this.
I am the one who asked this question. Thank you for enlightening me. It is all sooo clear now. How could I not think straight here? Of course, since I list the purchase price of my books under business expenses, the books are already fully written off, whether I sell them or not. It is not correct to claim them as deductions anymore when I donate the penny books out of the whole lot. Thanks for making that clear. I've got a lot to learn. It's my first business....
The last comment by the person who asked the question is exactly right. If you file a schedulede C, the donated books are considered part of "cost of goods sold." It would be inappropriate, not to mention illegal, to claim a personal deduction for them.
I can understand why you wouldn't be able to deduct the cost of inventory twice. But what about the value? What if, as a business, I bought a painting for $25,000 and deducted that cost of inventory. I then decided to donate that item and it was found to be worth well over $1,000,000. Can I deduct any of the actual market value over what my cost was?
I think the best source for the info you seek is the IRS. Call the toll-free number and ask. They don't bite and they don't "flag" you if you call. I used to work for the IRS (gasp) and while I don't have an answer, I can tell you that it's perfectly safe to call them. The call center, like most other call centers, have a two-tier support system so if the first person you talk to doesn't seem to have the answer - when they answer a question by saying "I think" - then it's time to ask to be bumped up to second tier support.
Also, and I could be really wrong, can't you write off worthless inventory as a normal business loss?
I have seen extensive comment on write-offs for art. See comment above. IRS allows only the amount that you paid for the item. In fact an artist that creates a $20,000 picture and donates to a recognized charity can only deduct the cost of the canvas and paints, maybe $100.
Deductions are based on expense not value.
BiddingTree
I've often thought about donating books to charity and taking the charitable deduction as well and understand what anonymous says about all ready deducting the cost of the books under cost of books sold calculation. But if I remove items from my inventory, donate them and thus reduce the value of my inventory (also part of equation of the cost of goods sold) then why shouldn't I get a charitable deduction? It really hurts my brain to think about it.
I use "It's Deductible" and give a count of the number of hardcovers and soft covers.
I forget the values they use, but it's more than fair. All you'll need is the count verified, as the IRS seldom questions TurboTax.
Post a Comment
Links to this post:
Create a Link
<< Home