Tax Preparation: Charity Donations from CharityDeductions.com

Now is the perfect time to get your stuff together for taxes. Tax preparation is something you should be doing right now, so that you are ready to go when your tax return is due. This is the time of year I start getting my stuff together for the accountant. And one of the things I do is itemize my deductions.

When to itemize your deductions

You want to itemize your deductions on Schedule A of Form 1040 if your deductions add up to more than the standard deduction that is offered. Mine do. Schedule A  includes deductions for your mortgage interest, as well as charity deductions, among other things. These are the main Schedule A deductions on most people’s taxes. The mortgage interest is pretty straightforward: Your lender will send you a statement.

The charity donations may not be as easy to figure out. This is where a Web site called CharityDeductions.com may be helpful. This site helps you figure out the fair market value of your items based on:

• Brand
• Current condition
• Age (in some cases)
• State you live in
• Other information

Keeping track of information on charity donations is now required, so if you are unsure of the fair market value, you can run an analysis. CharityDeductions.com gave me a special test code to put together my donation list to the local thrift store from back in May (I kept a record because you’re supposed to now).

When I donated, I just sort of guessed what the items were worth, and the thrift store just wrote down what I guessed. My guess was $196. Looks like I was off by $61. Of course, that’s not a huge deal to me, since it is more important to give than to worry about getting the tax deduction. But still, it sort of makes one wonder how many other taxpayers are underestimating the fair market value of their donations.

How CharityDeductions.com works for tax preparation

The idea is that you pay $19.95 per year to create reports of charity donations — including cash donations. Each time you make a donation, you are supposed to record it, and then you can print out a report that you can keep on file in case of audit, or give to your tax preparer as backup for your tax return deductions.

The service I find most helpful, though, is the fair market value report for donated goods. It helps you pinpoint what things are worth. However, you can look that information up on your own (but it is time consuming). If you donate several times a year to a thrift store or some other type of organization that accepts goods, this might be worth your while — especially if the amount you under-report equals more than $20 each year.

If you only donate goods once a year or so, however, you might be better off with guessing the fair market value. And cash donations are easy to record in personal finance software. I usually print off a report from my personal finance software to turn in to my accountant. But if you do your own taxes, or if you donate a lot of goods (including food to the food bank), you might find CharityDeductions.com helpful.