Non-Cash Donation Guide

Complete guide to donating property, stock, vehicles, and other non-cash assets with maximum tax benefits

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Understanding Non-Cash Donations

Non-cash donations include any contribution other than money: stocks, real estate, vehicles, artwork, household goods, and more. These donations can offer significant tax advantages, especially when donating appreciated property. However, they come with special valuation requirements, documentation rules, and deduction limits that differ from cash donations.

Important IRS Scrutiny

Non-cash donations receive heightened IRS scrutiny due to historical overvaluation abuses. Proper documentation, reasonable valuations, and compliance with all rules are essential to avoid audits and penalties.

Types of Non-Cash Donations

Most Common Non-Cash Donations

Clothing & Household Items

What: Clothes, furniture, appliances, dishes

Deduction: Fair market value

Condition: Must be good or better

Documentation: Receipt + photo + list

Publicly Traded Stock

What: Stocks, bonds, mutual funds

Deduction: Full market value

Tax benefit: Avoid capital gains

Documentation: Brokerage statement

Vehicles

What: Cars, boats, motorcycles, RVs

Deduction: Usually limited to sale price

Form required: 1098-C from charity

Documentation: Title transfer + receipt

Real Estate

What: Land, homes, commercial property

Deduction: Appraised value

Appraisal: Always required

Documentation: Extensive legal docs

Valuation Rules by Donation Amount

Under $250: Minimal Documentation

  • Keep your own written record
  • Note: Charity name, date, location, description, condition
  • Estimated fair market value
  • No receipt required from charity

$250-$500: Receipt Required

  • Must have written acknowledgment from charity
  • Receipt must include description of items
  • Charity does NOT need to provide value
  • Your responsibility to determine fair market value

$500-$5,000: Form 8283 Required

  • File IRS Form 8283 (Section A)
  • Provide detailed description of property
  • State how and when you acquired it
  • Document your cost or basis
  • Explain how you determined fair market value
  • No appraisal required yet

Over $5,000: Qualified Appraisal Required

  • File IRS Form 8283 (Section B)
  • Obtain qualified appraisal by independent appraiser
  • Appraisal must be within 60 days of donation
  • Appraiser signs Form 8283
  • Charity acknowledges receipt on Form 8283
  • Keep full appraisal report (don't file with return)

Donating Appreciated Securities

Why Stock Donations Are Tax-Efficient

Stock Donation Tax Benefits

Scenario: Donate $10,000 of stock purchased for $3,000

Capital gain: $7,000

Option 1: Sell Stock, Donate Cash

  • Sell stock: Receive $10,000
  • Pay capital gains tax (20%): $1,400
  • Donate remaining: $8,600
  • Charitable deduction: $8,600
  • Tax savings at 32% bracket: $2,752
  • Net cost: $7,248

Option 2: Donate Stock Directly

  • Transfer stock to charity: $10,000
  • Pay capital gains tax: $0
  • Charitable deduction: $10,000
  • Tax savings at 32% bracket: $3,200
  • Net cost: $6,800

Benefit of donating stock: Save $448!

Stock Donation Process

  1. Contact charity for their brokerage account info
  2. Contact your broker to initiate transfer
  3. Provide charity's DTC number and account
  4. Specify number of shares to transfer
  5. Transfer typically takes 3-7 business days
  6. Charity sells stock and keeps proceeds
  7. Request acknowledgment letter from charity

Stock Donation Requirements

  • Holding period: Must hold stock over 1 year for full deduction
  • Short-term holdings: Deduct basis only (cost), not market value
  • Deduction limit: 30% of AGI for long-term appreciated stock
  • Valuation: Average of high and low on transfer date
  • Best candidates: Highly appreciated stock in taxable accounts

Vehicle Donations

IRS Rules for Car Donations

Deduction Usually Limited

In most cases, your deduction is limited to the amount the charity actually sells the vehicle for, NOT the fair market value or Kelley Blue Book value.

Exception: Charity uses vehicle for its mission (drives it) and provides written certification = deduct fair market value up to $500 without appraisal

Vehicle Donation Scenarios

Charity Sells Vehicle

Most common scenario

  • Charity sells car at auction
  • Your deduction: Sale price
  • Charity sends Form 1098-C within 30 days
  • Example: KBB $5,000, sells for $2,800 = deduct $2,800

Charity Uses Vehicle

Rarely happens

  • Charity uses car for programs
  • Your deduction: Fair market value
  • Charity certifies intended use
  • Better tax benefit but uncommon

Charity Gives to Needy

Qualifies for FMV deduction

  • Charity donates car to individual
  • Your deduction: Fair market value
  • Charity provides certification
  • Recipient must be significantly needy

Vehicle Donation Documentation

  • Form 1098-C: Charity must provide within 30 days
  • Title transfer: Sign over title to charity
  • Keep records: Odometer reading, condition, all communications
  • File with return: Attach Form 1098-C to tax return

Household Goods and Clothing

Condition Requirements

IRS requires all donated items to be in "good used condition or better":

  • Good condition: Shows some wear but usable
  • Excellent condition: Minimal wear, like new
  • Not deductible: Torn, stained, broken, or unusable items
  • Exception: Single item over $500 with appraisal

Valuation Guidelines

Fair Market Value = Thrift Store Prices

FMV is what willing buyer would pay willing seller - typically 10-30% of original cost

Valuation Resources:

  • Salvation Army valuation guide
  • Goodwill price list
  • Local thrift store prices
  • Online listings for used items

Examples:

  • Men's suit (good condition): $25-$50
  • Women's dress (excellent): $20-$40
  • Sofa (good condition): $75-$150
  • Kitchen appliances: $15-$50
  • Books: $1-$3 each

Documentation Best Practices

  • Create detailed list: Item description, quantity, condition
  • Take photos: Before donation, showing condition
  • Get receipt: Have charity sign your itemized list
  • Keep records: Save for 3+ years
  • Be conservative: Don't overvalue items

Real Estate Donations

Types of Real Estate Gifts

  • Residential property: Homes, condos, vacation properties
  • Commercial property: Office buildings, retail, industrial
  • Undeveloped land: Vacant lots, farmland, conservation land
  • Partial interests: Remainder interests, conservation easements

Real Estate Donation Requirements

  • ☐ Qualified appraisal (always required)
  • ☐ Environmental assessment
  • ☐ Title search and clear title
  • ☐ Form 8283 Section B
  • ☐ Legal documentation of transfer
  • ☐ Charity acceptance (they may decline)
  • ☐ Consider mortgage issues (can trigger income)

Conservation Easements

  • Donate development rights while keeping ownership
  • Protect land from development in perpetuity
  • Deduct difference between full value and restricted value
  • Complex appraisal required
  • Must be to qualified land trust
  • High IRS scrutiny due to past abuses

Other Non-Cash Donations

Artwork and Collectibles

  • Over $20,000: Requires art appraisal by qualified expert
  • Related use rule: Art used by charity (e.g., museum) = full FMV
  • Unrelated use: Charity sells art = deduct cost basis only
  • IRS Art Panel: Reviews large art donation valuations

Business Inventory

  • Generally limited to cost basis, not retail value
  • Enhanced deduction available for certain donations (food, medical supplies)
  • Must donate to eligible organization
  • Complex rules for C-corporations vs pass-through entities

Intellectual Property

  • Patents, copyrights, trademarks
  • Initial deduction limited to cost basis
  • Additional deductions possible based on charity's income from property
  • Complex reporting requirements

Cryptocurrency

  • Treated as property, not cash
  • Deduct fair market value if held over 1 year
  • Avoid capital gains tax on appreciation
  • 30% AGI limit (appreciated property limit)
  • Growing charity acceptance

Appraisal Requirements

When You Need a Qualified Appraisal

  • Any single non-cash item over $5,000
  • Groups of similar items totaling over $5,000
  • All real estate donations (any amount)
  • Artwork valued over $20,000

Qualified Appraiser Requirements

Appraiser Must Be:

  • Earned appraiser designation from recognized professional organization
  • Regularly performs appraisals for compensation
  • Demonstrates verifiable education and experience
  • Not the donor, charity, or related party
  • Not regularly used by donor (no more than once every 3 years)

Appraiser must: Complete Section B of Form 8283 and sign under penalties of perjury

Appraisal Report Contents

  • Description of property
  • Physical condition
  • Date of contribution
  • Terms of any agreement regarding property
  • Name, address, and qualifications of appraiser
  • Appraiser's statement of independence
  • Valuation method used
  • Basis for valuation
  • Date of appraisal (within 60 days of donation)

Common Non-Cash Donation Mistakes

Avoid These Errors

  • Overvaluing items: Using retail price instead of thrift store value
  • Missing Form 8283: Required for donations over $500
  • No appraisal: Required over $5,000, triggers audit
  • Poor documentation: No photos, vague descriptions
  • Unqualified appraiser: Relative, friend, or charity employee
  • Late appraisal: Must be within 60 days of donation
  • Donating loss property: Better to sell first, donate cash
  • Wrong charity type: Not all charities qualify for non-cash

Form 8283 Instructions

Section A: Items Under $5,000

  1. Describe property donated
  2. State date acquired and how
  3. Provide donor's cost or basis
  4. Enter fair market value
  5. Explain method of determining FMV
  6. Charity signs acknowledging receipt

Section B: Items Over $5,000

  1. Complete all Section A requirements
  2. Attach qualified appraisal summary
  3. Appraiser completes and signs declaration
  4. Charity signs acknowledgment
  5. Keep full appraisal report (don't file)
  6. If over $500,000, attach full appraisal to return

Strategic Non-Cash Giving Tips

Best Assets to Donate

  • Highly appreciated publicly traded stock
  • Real estate with large gains
  • Artwork that has appreciated significantly
  • Cryptocurrency held over 1 year with gains

Assets to Sell Before Donating

  • Depreciated assets (take capital loss first)
  • Inventory at cost basis
  • Property with losses
  • Assets held less than 1 year

Timing Considerations

  • Start appraisal process 90+ days before year-end
  • Stock transfers take 3-7 days, start early
  • Real estate can take months, plan accordingly
  • Household goods can be done last minute

Non-Cash Donations Require Extra Care

Non-cash donations offer significant tax benefits but require careful documentation, proper valuation, and compliance with IRS rules. Always obtain required appraisals, keep detailed records with photos, and be conservative in valuations. When done correctly, donating appreciated property can be one of the most tax-efficient forms of charitable giving.