Charitable Tax Deduction Lessons from Netflix’s Marie Kondo
This year, Netflix released the new show “Tidying Up with Marie Kondo” that follows organizational expert Marie Kondo’s quest to help American families clean up their homes. As Kondo visits a new family each week, she focuses on evaluating all their belongings and only keeping those that “spark joy.” In each episode, the piles of “non-joy sparking” items continue to grow and with it the potential opportunity to make tax-deductible donations. Although April 15th may have already passed, consider donating over dumping to work on your tax position proactively.
When donating to charitable organizations such as Goodwill and Out of the Closet, make sure you obtain a donation receipt from the charity. You should also make an itemized list with the items’ estimated fair market values, also known as the price someone would potentially pay for your goods. This step is especially crucial if you think the total monetary value of the donation given is over $500. Remember to write down the name of the organization you donated to and the date of your donation for your records. In cases where your contribution is valued at over $5,000, an appraisal may be required, and you should always have the charity acknowledge the item that you donated in writing. You may be able to claim up to 50 percent of your income as a tax deduction based on your donations. A tax attorney can help you properly value and classify all kinds of donations based on very specific IRS rules.
Keep in mind that when making any charitable donation you won’t receive the deduction until the items or cash are turned in, and all donations must be given by the end of the tax year. You should also always research organizations you donate to, confirming they are legitimate and a qualified tax-exempt organization. If you have a cause in mind, you can determine if it’s an eligible 501(c)(3) for tax-deduction purposes using this IRS search tool.
No matter the amount, your generosity in gifting time and money to worthwhile causes can have a significant impact on your tax liability. While tax considerations should never drive your charitable giving, it makes sense to structure your gifting to maximize the tax benefits. If you have questions regarding your gifting or estate plan, please contact Talley LLP today.