WITH THE HOLIDAY SEASON JUST AROUND THE CORNER IT SEEMS AS APPROPRIATE A TIME AS EVER TO DISCUSS CHARITABLE CONTRIBUTIONS AND WHEN DONORS SHOULD ENGAGE A QUALIFIED APPRAISER TO DETERMINE THE FAIR MARKET VALUE OF THEIR DONATED PROPERTY.
Charitable contributions provide enterprises and individuals with an opportunity to give back while also providing tax-saving benefits. A wide variety of items can be donated and are eligible for tax-savings. Depending on what is being donated, and the value of the donation, you may need to complete IRS Form 8283.
Charitable contributions are only deductible if they are made to a qualified organization. The IRS defines what type of organization qualifies for charitable contributions here. Typically, organizations operated exclusively for charitable, religious, educational, scientific, or literary purposes will qualify. Charitable contributions made to individuals are never deductible.
In many cases, charitable contributions take the form of items other than cash or cash equivalents. IRS Form 8283: Noncash Charitable Contributions is a tax form used to deduct noncash contributions made to a qualified charity. For those that plan on itemizing, noncash contributions can include:
- Qualified Conservation Contribution
- Real Estate
- Intellectual Property
If the combined value of all the property donated is between $500 – $5,000, then IRS Form 8283, Section A must be prepared. This holds true for individuals and partnerships, but not for C-Corporations. C-Corporations only need to file Form 8283 if their donation exceeds $5,000.
In most cases, if you claim a deduction for a noncash contribution worth more than $5,000, then you are required to obtain a formal appraisal and must fill out IRS Form 8283, Section B. This includes groups of related items that have a combined value of over $5,000. A qualified appraiser will determine the fair market value of the donated property. The IRS defines fair market value as, “The price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.” Qualified appraisers should have a demonstrated knowledge of the donated property and a sound understanding of valuation. An appraiser must sign and date Part III of IRS Form 8283, Section B no more than 60 days prior to the donation date.
It’s important to note that there are a number of exceptions to these rules. For example, appraisals are not required for donations involving private stock valued at $10,000 or less. Additionally, publicly traded securities do not require a formal appraisal because they have market quotations readily available. Donors should also be aware that for most of the organizations they donate to, the IRS limits their deductions to 50% of their adjusted gross income.
Noncash charitable contributions are a great way to support charitable organizations. When done correctly, these contributions can provide donors with meaningful tax deductions. Failing to complete or improperly filing IRS form 8283 will disqualify donors from claiming charitable contribution deductions. To ensure that they receive their entitled tax-saving benefits, donors should seek counsel whenever they intend on making noncash charitable contributions. Furthermore, when applicable, donors should engage a qualified appraiser to determine the fair market value of their donated property.