Tangible Personal Property:

Questions Donors Ask

What are the tax benefits of donating personal property?
  • The key question to determine this is whether the donation has a legitimate use related to the charitable mission of your organization. For example, a gift of artwork or a stamp collection can enhance an educational purpose; a gift of a piano or other musical instrument can enhance a music program; a gift of kitchen equipment can enhance a meal program, etc. If the donor’s gift is related to your organization’s charitable work, then the donor’s income tax deduction is based on the fair market value of the property. For gifts of property with a value of $5,000 or more, an independent qualified appraisal of the property is required by the IRS.
  • If their gift of personal property has no relation to your organization’s charitable work, then the donor’s tax deduction is limited to your cost basis in the property. Donors should acquire IRS publications 526 and 561 to review all the comprehensive information available for gifts of personal property.
Can I arrange for a life-income stream for my gift of personal property?

In some cases, the answer is yes. Personal property can be transferred to a charitable remainder unitrust, which will provide the donor with tax deduction benefits and set up an income stream for beneficiaries such as a spouse, children, and/or other loved ones. Only personal property with a value of $50,000 or greater should be considered for this purpose.

Will your organization sell the property immediately and collect the proceeds?

No. Because your organization will only accept property that meets the “related use” requirements (unless the donor intends otherwise with full understanding of the consequences), you will apply the property to your charitable purposes and not sell it when it is received. Note further that if you were to dispose of the property within three years of receiving it, donors will be required to report to the IRS certain information about the gift and its disposal. Such a filing could raise questions about the legitimacy of the fair-market-value deduction donors claimed in the year of contribution, and they could be required to adjust their deduction amount. (Note that there is an exception for this rule if your intended use of the property becomes impossible or infeasible to implement after the gift.)

Will I get a fair-market-value deduction for property I donate to a silent auction or rummage sale?

No. Although the proceeds of silent auctions and rummage sales are probably used to further your organization’s mission, the use of the donated item is not “related” to your exempt purpose or function. Your intent will be to sell the property as soon as possible and collect the proceeds for your charitable purposes. Thus, the donor’s charitable deduction will be limited to their cost basis in the property.

Can I deduct the value of professional services I provide?

No. Federal tax law does not permit a deduction for the value of services (such as legal or accounting services) the donor may provide on a volunteer basis. The donor will be able, however, to deduct non-reimbursed out-of-pocket costs such as travel and postage that they incur in providing those services.