Ask Kim
Clean Out Your Closet and Cut Your Tax Bill
I'm thinking about having a garage sale. Should I go for the immediate benefits of the sale or donate my extras and reap the tax benefits?
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
November 14, 2003
I'm thinking about having a garage sale. Should I go for the immediate benefits of the sale or donate my extras and reap the tax benefits?
If you don't mind spending your weekend sitting outside while neighbors rummage through your stuff, then you'll probably make more money from the garage sale.
Any items you donate to charity are only deductible at their fair market value, which is essentially the same price you could get if you sold them yourself. So if you donate $1,000 worth of stuff and you're in the 25% tax bracket, you'll only lower your tax bill by $250. And you can't write off any charitable deductions unless you itemize.
But donating the items is a whole lot easier, and you don't have to worry about your ugly old lamp that won't sell.
You can figure out the items' fair market value by checking prices at a thrift shop or using the valuation guide at the Salvation Army Web site. Another good tool: ItsDeductible software ($19.95) lists the fair-market value for thousands of items and helps you with tax reporting.
You'll need to file form 8283 if you deduct more than $500 worth of donated items, describing who you gave it to, when, and to whom. You'll need to submit a written appraisal for anything worth more than $5,000. The appraiser must be an expert in the field. The American Society of Appraisers and the International Society of Appraisers can help you find the appropriate expert in your area. For more information, see IRS Publication 561 Determining the Value of Donated Property.
Another option: Try selling yours stuff on eBay. You might make more money when the knickknack collectors start a bidding war for your stuff. And you don't have to sit outside in the cold.