Donation Appraisals

This article appeared in the April/May 1999 issue of AntiquePrime Magazine & Journal.

For What It's Worth ...

Q. I've donated some furniture to a charity. Do I need an appraisal to be able to take a deduction on my federal income taxes?  

A. Maybe. Check with your tax attorney and/or CPA. Here are some things to keep in mind:
  • The organization receiving your gift must be a qualifying charitable organization.
  • This qualifying charitable organization must have a mission which is related to the property being donated. You can't take a tax deduction for donating a sewing machine to a hospital.
  • If you place restrictions on what the qualifying charitable organization can do with the property (i.e., if you tell them they can't sell it), the Fair Market Value (FMV) must reflect that restriction. To determine how much a taxpayer may deduct, this FMV determination must first be made.
What is FMV? Internal Revenue Regulation Section 1.170A-1(c)(2) defines FMV for donation purposes as "The price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts." Let's look at two examples. If you donate used clothing or household goods to the Salvation Army, FMV would be the price that typical buyers actually pay for items of this age, condition, and style. Usually, such items are worth far less than what was originally paid for them. On the other hand, for donation of antiques or works of art, the taxpayer may be giving property that has increased in value. Different rules apply depending on if that property is ordinary income property or capital gain property.

IRS Form 8283 is required if your non-cash charitable contributions are more than $500.00 for the year. For donations between $500.00 and $5,000.00, no appraisal is required, but the taxpayer must complete Section A on the 8283 Form. Section B is for items (or groups of similar items) with a FMV of more than $5,000.00 and an appraisal by a qualified appraiser is required. However, the appraisal does not need to be attached to the tax return unless the total deduction (usually for art) is $20,000.00 or more. The appraiser's signature, as well as your own and one from the qualifying charitable organization, is required on Form 8283 for donations exceeding $5,000.00.

This is a complex subject for a limited space. I encourage you to seek the advice of your tax professional.