How the IRS Values Noncash Donations for Deduction Purposes

Overview

Donating clothing, furniture, vehicles, artwork or business equipment can both support causes you care about and reduce your tax bill — but only if you value and document the gift correctly. The IRS requires donors to establish the fair market value (FMV) of noncash donations on the date of contribution, follow specific reporting rules, and keep supporting records. Mistakes — like overvaluing items or skipping required forms — can lead to denied deductions, penalties, or audits. (IRS Pub. 561; IRS Charitable Contributions pages.)

In my practice working with individuals and small businesses, I regularly see three recurring issues: unclear valuation methods, missing Form 8283 when needed, and thin documentation. Addressing these three items up front saves time and preserves deductions.

Sources: IRS Publication 561, Determining the Value of Donated Property (https://www.irs.gov/publications/p561) and IRS charitable contributions guidance (https://www.irs.gov/charities-non-profits).

Key IRS rules and reporting thresholds (at a glance)

• Fair Market Value (FMV): The baseline standard — what a willing buyer would pay a willing seller for the property in its current condition on the donation date (IRS Pub. 561).
• Written acknowledgement: For any contribution of $250 or more, you must obtain a contemporaneous written acknowledgement from the charity describing the gift and stating whether goods or services were provided in return. (IRS Charitable Contributions page.)
• Form 8283:
• Complete Section A and attach Form 8283 to your return if the total deduction for a single noncash contribution or combined noncash contributions for a single item exceeds $500.
• For contributions valued over $5,000 (other than publicly traded securities), you generally must obtain a qualified appraisal and complete Section B of Form 8283; the appraiser and donee must sign the form. (See Form 8283 instructions and IRS Pub. 561.)
• Vehicles and boats: Special rules apply. If the charity sells the vehicle, your deduction is generally limited to the gross proceeds reported by the charity. You may deduct FMV only if the charity uses the vehicle in its program or provides a written statement that it won’t sell the vehicle. (IRS: Donating a Vehicle to Charity.)

References: IRS Publication 561 and Form 8283 instructions (https://www.irs.gov/forms-pubs/about-form-8283).

How the IRS expects you to determine FMV

The IRS does not provide a single “FMV calculator.” Instead, it points to reasonable valuation methods that depend on the item type and its condition:

1. Use comparable sales (market approach). Look for recent sales of similar items in similar condition. For household goods, thrift-store prices and local resale listings are commonly used.
2. Replacement cost minus depreciation (replacement cost approach). Estimate what it would cost to purchase a similar used item today and reduce for wear and age.
3. Professional appraisal (income or market approach for complex items). For antiques, fine art, jewelry, or unusual business property, a qualified appraiser may be required (particularly if the claimed value exceeds $5,000).
4. Specialized guides. Kelley Blue Book, NADA, or Edmunds for vehicles; Salvation Army or Goodwill valuation guides for clothing and household items can provide reasonable benchmarks.

Be explicit in your documentation about which method you used and why it produced a reasonable FMV.

Valuing common noncash gift types (practical guidance)

• Clothing and household goods: FMV means the price used items of similar quality and condition sell for at thrift stores or on resale platforms. Don’t claim retail prices for items showing wear. The Salvation Army and Goodwill publish value guides you can cite. (IRS Pub. 561.)

• Vehicles: Check Kelley Blue Book / NADA for private-party values, then compare to the charity’s intended use. If the charity sells the car, your deduction is limited to the sale price reported by the charity on Form 1098-C or written acknowledgment. If the charity uses the car or transfers it for a charitable purpose, you can typically deduct FMV — but get a written acknowledgment describing the use. (IRS vehicle-donation rules.)

• Furniture and appliances: Use local resale or thrift prices to estimate FMV. Condition substantially affects value — list defects, age, and comparable sale prices in your record.

• Art, antiques, jewelry, and collectibles: These often require a qualified appraisal if the claimed deduction exceeds $5,000. A qualified appraiser must meet IRS rules; Pub. 561 explains evidence the IRS considers reasonable. Keep auction sales or dealer price lists as supporting evidence.

• Publicly traded securities: FMV is normally the average of the high and low price on the donation date or the closing price, depending on the situation. Different rules apply for appreciated securities; see IRS guidance and your broker’s donation paperwork.

• Real estate and business property: Complex valuations typically require a written appraisal from a qualified appraiser and careful review of title, zoning, and encumbrances. Consult a tax professional before donating real property.

Documentation checklist (what to keep and for how long)

• Written acknowledgment from the charity for any gift $250 or more, including the date, description of property, and statement of any goods/services provided in return. (Retain for at least 3 years; longer if an audit occurs.)
• Photographs of items (especially useful for condition evidence).
• For gifts > $500: complete and attach Form 8283 to your tax return (Section A).
• For gifts > $5,000 (most types): qualified appraisal and Section B of Form 8283, signed by the appraiser and the charity.
• Comparative sales or valuation resource notes: links or printouts from KBB, thrift guides, auction results, or dealer quotes showing similar items and prices.
• Receipts and mileage logs if the gift required transportation costs.

Keep records for the statutory period the IRS can assess additional tax (usually three years, but longer in some cases). Documentation helps you substantiate FMV and avoids disputes.

Examples from practice

1) Donating a 10-year-old car: I worked with a client who donated a 2013 sedan. Kelley Blue Book private-party value for the car in “good” condition was $8,000. The charity sold the car at auction for $7,800 and provided Form 1098-C showing the sale. The client deducted $7,800 (the charity’s reported proceeds), not the $8,000 KBB value, because the charity sold the vehicle.

2) Donating household furniture: A client estimated a living-room set at $3,500 based on original purchase price. After documenting comparable thrift-store prices and photos showing wear, we reduced the claim to $1,200 FMV and retained the charity receipt plus thrift-price printouts. The adjusted, documented amount was accepted without question.

3) Donating artwork: For donated paintings estimated over $5,000, I require a written appraisal from a qualified appraiser and the appraiser’s qualifications documented. We complete Section B of Form 8283 and attach the appraisal to the return.

Common mistakes and audit triggers

• Inflating value: Claiming retail or replacement cost without accounting for age and condition. The IRS asks for evidence that a buyer would pay your claimed price.
• Skipping Form 8283 when required: Failure to attach Form 8283 for gifts over $500 can lead to denial of the deduction.
• No appraisal when required: For items over $5,000, an appraisal may be mandatory. Missing appraisals commonly trigger inquiries.
• Thin documentation: Missing photos, receipts, or contemporaneous acknowledgments raises red flags.

The IRS can disallow unsubstantiated deductions and impose penalties for valuation misstatements. Keeping conservative, well-documented valuations protects you.

Professional tips to maximize compliance and value

• Start the valuation process before the donation. Photograph items and note defects; evidence taken after donation is weaker.
• Use established valuation guides and keep screen captures or printouts with dates. When using KBB or thrift guides, record the exact page or report you used.
• When donating high-value or unusual items, get a qualified appraisal upfront. It improves reliability and reduces IRS pushback.
• Consider donating securities or investments when possible — appreciated publicly traded securities often provide better tax outcomes (a direct stock gift can avoid capital gains tax and yield a full FMV deduction if you itemize).
• When in doubt, consult a CPA or tax attorney. I routinely advise clients to run valuations past their tax preparer before filing to confirm reporting obligations and required documentation.

For detail on the types of documentation the IRS expects and practical recordkeeping, see our guide: How to Document Charitable Donations for Maximum Deduction.

Also review the broader rules on limits and documentation at: Charitable Contribution Deductions: Documentation and Limits.

When to get professional help

If a single donated item’s claimed value exceeds $5,000; if you plan to donate real estate, business property, or a valuable artwork; or if your donation strategy is part of an estate or tax-planning move, hire a qualified appraiser and involve your CPA early. Professional input can prevent large headaches later and ensure you meet Form 8283 and appraisal requirements.

Final notes and legal disclaimer

Accurate valuation of noncash donations is both a compliance task and a planning opportunity. Conservative, well-documented valuations are more defensible in audits and keep your tax benefits intact.

This article summarizes IRS rules and practical valuation methods as of 2025 for educational purposes and does not constitute tax advice. For personalized guidance, consult a qualified tax professional.

Authoritative sources:

• IRS Publication 561, Determining the Value of Donated Property: https://www.irs.gov/publications/p561
• IRS Charitable Contribution guidance and vehicle-donation rules: https://www.irs.gov/charities-non-profits
• Form 8283, Noncash Charitable Contributions instructions: https://www.irs.gov/forms-pubs/about-form-8283