Noncash Charitable Contribution Appraisals

A deduction for noncash contributions is generally subject to certain limitations depending on the type of taxpayer, the nature of the property contributed, and the type of donee organization. Taxpayers are required to obtain a qualified appraisal from a qualified appraiser for donated property which a deduction of more than $5,000 is claimed. (An exception to this long-standing requirement is the new PPA requirement that donated clothing or “household items” in less than good used condition and valued in excess $500 must now also be appraised by a qualified appraiser)

When 100% of the taxpayer’s (donor’s) interest in noncash property having a related-use to a qualifying organization is donated to that organization (donee), the taxpayer is allowed an income tax deduction of an amount equal to either fair market value of the property or the taxpayer’s basis in the property –which is allowed depends on the type of property and the length of time the property was owned by the taxpayer.

Taxpayers may lose all or part of their claimed deduction if any of the following apply:

  • Less than 100% of the taxpayer’s ownership interest is donated. The taxpayer may own only a fractional interest in the property being donated (such as a co-owned painting being donated to a museum). Regardless, the taxpayer must donate 100% of whatever that fractional interest might be.
  • The donated property is not of a related-use to the mission of the organization receiving the donation. The related use rule requires that the use of the donated object by the donee organization be related to the purpose or the function constituting the basis for the organization’s charitable exemption under IRC Section 501.
  • If you’re donating tangible personal property, such as a work of art, what the charity does with the item affects how much you can deduct. If you donate land so the local homeless shelter can build a new facility to house more people, you can write off the full market value. But let’s say you donate a work of art to the shelter for its fundraising auction: In that case, you only get a deduction for the price you paid for the artwork. What if you donated the piece of art to a museum that will display it as part of its collection? In that case you get to deduct the full Fair Market Value.
  • The receiving organization is not a qualifying organization. In order to maximize the benefits of a chartable deduction, the donee organization must be a qualifying public (not private) charitable organization. In general, qualified public charitable organizations include non-profit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.