Bank Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays Bank.
Not quite two weeks ago, I put together an article on year end money moves. As a followup, I thought I’d spend a bit of time expanding on my favorite — clearing out your house and donating your extras to charity.
Every year in mid- to late-December, my wife and I make a point of going through our closets, the playroom, and the garage with the intention of purging our house of excess stuff. We both hate clutter, and this is also a great way to help out local charities. And now that we’re done having kids, we’ve been able to clear out a good bit of kid stuff in each of the past couple of years.
Beyond being incredibly cathartic, doing this can be pretty rewarding from a financial standpoint… Last year during tax time I spent a bit of time entering everything into ItsDeductible (free with Turbo Tax Deluxe) and, while it took me a couple of hours, it was well worth the trouble.
ItsDeductible assigns a fair market value based on prevailing prices at resale outlets and on eBay, and this value was consistently above what I would’ve otherwise used if I just had to pull a number out of thin air. In the end, we wound up with several thousand dollars worth of non-cash donations that turned into a really nice tax deduction. Of course, this number was inflated a bit by the fact that we moved during 2006, and thus donated more throughout the year than we otherwise would have.
The bottom line here is that, as long as you itemize your tax deductions, you can save yourself a nice chunk of money without going to the trouble of running a garage sale. This is especially true if you find yourself in one of the higher tax brackets — in our case, we’ll save nearly 40% of the value of the items that we donate when you consider both state and federal taxes.
Things to keep in mind:
Clothing and household items “must be in good used condition or better” to qualify for the deduction. That being said, you can claim a deduction of more than $500 for any single item, regardless of its condition, if your include a qualified appraisal of the item with the return.
You also need to keep documentation on hand to substantiate your deductions in case of an audit. First and foremost, be sure to get a receipt for your donation. You should also produce an itemized list of everything that you donate, and it wouldn’t be a bad idea to spread the items out and snap some pictures before dropping them off.
Finally, be sure to make your donation by New Year’s Eve at the latest, otherwise you’ll have to wait a year to take the deduction.
This article is part of the MoneyBlogNetwork Group Writing Project on year end money moves. Be sure to check out the other contributions to this project:
AllFinancialMatters – Time to Rebalance Your Portfolio
Blueprint for Financial Prosperity – Dumb Year End Money Moves
Consumerism Commentary – Use Your Flexible Spending Account Before It’s Too Late
NoCreditNeeded – Jump Start Your Debt Reduction…
FreeMoneyFinance – Make Your Charitable Deductions Before Year End
MightyBargainHunter – Grab Some Year End Bargains
Get Rich Slowly – Paycheck and Witholding Calculators for Year End Money Moves
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math (693)
- Dish Network Customer Service SUCKS (536)
- $8,000 Homebuyer Tax Credit (429)
- Pay Off Mortgage Early or Invest? (424)
- How to Claim the First-Time Homebuyer Tax Credit (352)
- Termite Control: Sentricon vs. Termidor (329)
- How Much Should You Pay a Babysitter? (288)
- Ethanol Blended Gas = Lower Mileage? (272)
- Reduced Credit Limits? Share Your Experience (256)
- $15,000 Homebuyer Tax Credit (242)
- Buying Furniture off the Back of a Truck (237)
- Will Mac OS X Lion Kill Quicken 2007? (191)