Overview

Donating in-kind or noncash gifts—clothing, furniture, vehicles, real estate, publicly traded stock, or even volunteer time in a limited sense—can lower taxable income when the donation is made to a qualified charitable organization. The size of the tax benefit depends on the item’s fair market value (FMV), how long you held the asset, the recipient organization’s status, and strict IRS substantiation rules. For federal guidance, see IRS Publication 526 and the IRS overview of in-kind donations (IRS.gov).

Sources: IRS Publication 526, IRS in-kind donations guidance (https://www.irs.gov/publications/p526; https://www.irs.gov/charities-non-profits/in-kind-donations)

How the IRS Values and Limits Deductions

  • Fair Market Value (FMV): Deductions for most noncash gifts are based on the FMV at the time of donation—the price a willing buyer would pay a willing seller. For tangible personal property (clothing, furniture), FMV is typically less than original purchase price unless the item appreciated.

  • Long-term appreciated property: If you donate property you’ve owned more than one year (for example, publicly traded stock or artwork that appreciated), you generally may deduct the FMV. For gifts of long-term capital gain property to public charities, the deduction is usually limited to 30% of your adjusted gross income (AGI). (See IRS Publication 526.)

  • Ordinary-income or short-term property: For property that would generate ordinary income if sold (inventory, property held one year or less, or property subject to ordinary income treatment), the deduction is generally limited to your basis in the property (what you paid) or its FMV subject to lower percentage limits.

  • Organization type matters: Contributions to public charities generally get more favorable percentage limits than gifts to private foundations or donor-advised funds. Limits are applied as a percentage of AGI and unused contributions may be carried forward up to five years.

Because rules vary by property type and recipient, I recommend referencing IRS Publication 526 and consulting a tax professional before claiming these deductions.

Reporting and Substantiation Requirements

Accurate reporting and documentation are the most common failure points. Important rules to follow:

  • Written acknowledgment for donations of $250 or more: If you claim a deduction of $250 or more, obtain a contemporaneous written acknowledgment from the charity that includes description of the property and whether you received any goods or services in return (IRS Publication 526).

  • Form 8283 (Noncash Charitable Contributions): If the total deduction for all noncash gifts claimed on a return for the year is more than $500, you must complete Form 8283 and attach it to your Form 1040. For an individual gift of property valued over $5,000 (with some exceptions such as publicly traded securities), you must complete Section B of Form 8283 and generally obtain a qualified appraisal and the appraiser’s signed statement. See Form 8283 instructions (IRS).

  • Qualified appraisal: Required for most donated property valued above $5,000 except publicly traded securities. The appraisal must meet IRS rules, be done by a qualified appraiser, and be obtained before filing the tax return (see Form 8283 instructions).

  • Vehicles and special property rules: Special substantiation applies to vehicle donations. If the charity sells the vehicle, your deductible amount is generally limited to the gross proceeds reported by the charity. If the charity uses the vehicle in its exempt function or makes significant improvements, you may be able to deduct FMV; the charity must provide a written statement describing the use (IRS vehicle donation guidance).

References: Form 8283 instructions; IRS vehicle donation guidance (https://www.irs.gov/forms-pubs/about-form-8283; https://www.irs.gov/charities-non-profits/charitable-contributions/vehicle-donations)

Practical Examples

  • Household goods: Donated clothing and household items must be in good used condition or better to be deductible. FMV is what similar items sell for at thrift stores. Keep a detailed list and photos; obtain a receipt with the charity’s name and date of donation.

  • Publicly traded stock: Donating long-term appreciated stock directly to a public charity often yields better tax results than selling the stock and donating cash. You may deduct the full FMV of the stock (if held >1 year) without recognizing capital gains, subject to percentage limits.

  • Vehicle donation: You donate a car to a local charity. If the charity sells the car, you can deduct only the amount the charity reports it sold for (the gross proceeds) unless the charity used the vehicle in its operations and provides a statement otherwise.

  • Real estate and artwork: High-value property usually triggers appraisal requirements and Form 8283 Section B. For real estate gifts, the charity’s inspection, title clearance, and use plans often determine deductible treatment.

Steps to Maximize Deductions and Reduce Audit Risk

  1. Identify the item type and ownership period to understand whether it’s long-term capital gain property or ordinary-income property.
  2. Determine FMV using comparable sales, thrift-store pricing guides, or professional appraisals for high-value items.
  3. Obtain contemporaneous written acknowledgments from the donee charity for any single contribution of $250 or more.
  4. Complete and attach Form 8283 when total noncash contributions exceed $500 for the year. For items over $5,000, secure a qualified appraisal and attach Section B as required.
  5. Keep clear records: receipts, photos, appraisals, correspondence with the charity, and donation logs. These are especially important if you claim large deductions or donate unusual items.
  6. Coordinate with your tax preparer: share appraisals, receipts, and the charity’s acknowledgment early so the preparer can prepare Form 8283 correctly.

For detailed documentation guidance, see our walkthrough on how to document charitable noncash donations for taxes and the guide on documenting charitable contributions for tax time.

Internal resources: how charitable donations affect taxes, Form 8283 — Noncash Charitable Contributions, and how to document charitable noncash donations for taxes.

Common Mistakes and Audit Triggers

  • Overvaluing items: Listing original purchase price or inflated FMV invites IRS scrutiny. Use realistic thrift-store comparables or appraisals.

  • Skipping Form 8283 when required: Failing to attach Form 8283 or the required appraisal for large gifts can lead to disallowed deductions.

  • Ignoring the $250 acknowledgment rule: Lack of a written acknowledgment for donations of $250+ can disallow the deduction.

  • Donating to nonqualified recipients: Gifts to individuals, political organizations, or non-qualifying groups are not deductible.

Business vs Individual Donations

  • Individuals: Claim donations on Schedule A if you itemize deductions. If you take the standard deduction, noncash donations do not reduce your federal taxable income.

  • Businesses: Business contributions (for example, inventory donations from a retailer) follow different rules—C corporations and pass-through entities have different deduction limits and reporting considerations. A business may be able to deduct the cost or the lesser of cost or FMV depending on the nature of the gift and its tax classification. Consult a business tax advisor for corporate and pass-through entity implications.

Professional Tips

  • Consider donating appreciated publicly traded securities instead of selling them first; this often avoids capital gains tax while preserving a larger charitable deduction.
  • For valuable collections or real estate, plan donations in advance. Early coordination with the charity and a CPA reduces friction and ensures appraisal timing meets IRS rules.
  • Use contemporaneous photos, list serial numbers, and include proof of original purchase when available.

Frequently Asked Points

  • A donation’s deductible amount depends on the property type and recipient, not simply how much you paid for the item.
  • Noncash donations are only deductible if made to IRS-qualified organizations; always verify the charity’s tax-exempt status (IRS Tax Exempt Organization Search).
  • Unused charitable deductions may be carried forward for up to five years subject to percentage limits for the tax year the gift was made.

Professional Disclaimer

This article explains general federal tax rules for in-kind donations and noncash gifts as of 2025 and is for educational purposes only. It is not tax or legal advice. Your situation may differ—consult a qualified tax professional or attorney before claiming deductions or making large noncash gifts. See IRS Publication 526 and Form 8283 instructions for official guidance.

Authoritative Sources

For hands-on help, consult our articles on how charitable contributions affect your taxes and the specific Form 8283 reporting rules to make sure your donation is documented, reported, and deductible.