Donating books to charity & claiming a deduction on my income tax: How to value the goods?
I have a large number of books. I tried selling them on Amazon, but they don't cost enough to make up for the shipping. I tried selling them at local book stores, but they barely took any of them and the money for each book was extremely low. I was thinking that if I donated them to charity then I could get a better value per book as a tax write-off. Does anybody know where I can find information on the percentage of the original value of the book that I can claim for charity purposes and the maximum amount that I can claim.
I live in Canada.
A link to the right information would be very much appreciated.
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in the U.S. (for @Software Monkey) books are treated just like any other donation, you look at comparable sales: IRS Link. Sounds like a pain to do each book manually. TurbtoTax has "ItsDeductable" product that suppose to help you calculate the value of donated items.
As others have mentioned, it's important that there is a fair assessment of the market value of the items being donated. Joel's point about the government not looking kindly upon overvalued donations also applies in Canada: the CRA doesn't look kindly upon donation schemes such as "buy-low, donate-high arrangements."
Since nobody has offered up authoritative information for Canada yet, here's something to look at:
CRA - Income Tax Interpretation Bulletin - IT-297R2 - Gifts in Kind to Charity and Others
Excerpts:
3) Gifts in kind of a taxpayer
include capital property, depreciable
property, personal-use property ...
[...]
6) The fair market value of a gift in
kind as of the date of the donation
(the date on which beneficial
ownership is transferred from the
donor to the donee) must be determined
before an amount can be recorded on a
receipt for tax purposes. [...] The
person who determines the fair market
value of the property must be
competent and qualified to evaluate
the particular property being
transferred by way of a gift. Property
of little or only nominal value to the
donor will not qualify as a gift in
kind. Used clothing of little value
would be an example of a
non-qualifying contribution.
You will need to find a charity that would both value the books you would be donating and be willing to issue you a receipt for your charitable donation. Whatever receipt they issue should be in line with fair market value of the goods donated. Assume your donation receipt will be challenged, and keep both:
An inventory of what you donated (pictures might help), and
Supporting documentation used in helping assess the fair market value of the goods; the CRA might not accept a verbal "I checked eBay".
Finally, reasonable comparables might be prices for similar used goods, not a percentage of new. Though, if you can't find a price for a particular title in the used market, an estimate consistent with other valuations in the lot would be better than nothing, perhaps.
For larger items such as cars this is certainly possible; I've donated a car before (in Canada) and got a tax receipt that was probably worth more than I would have got from a dealer for the car. However with donations of this kind there are two obstacles:
You have to find a charity who actually wants the books.
The charity can give you a receipt for at most the market value of the books, which as you've indicated isn't much. It may not really be worth their time unless you have a lot of books.
Two other options for you to consider. Most medium towns have used book shops which you can sell them to. If the used book shops don't want them then your books really aren't worth enough to be worrying about, in which case see option two: give the books to a charity or thrift shop and don't worry about the receipt. Sometimes a nice feeling is the best return you will get.
I'm not sure what the situation is in Canada, but in the US, the IRS does not look kindly on people overvaluing donations of used goods. The rule is obviously abused quite a bit, but that doesn't mean it's legal!
Different used books have different values, usually depending on supply and demand, and there are online databases that make it easy to check the value of a book using a barcode scanner. If you took a book to a used bookstore and they didn't want to buy it, that's because supply greatly exceeds demand... it might be last year's bestseller, for example.
In this situation, donating the book to charity and claiming that the book is "worth" more than it's actually worth is really nothing more than cheating on your taxes. You may or may not get caught, but it's certainly not the intent of any tax code to give people a break on their taxes for donating worthless books to a charity which will inevitably just have to recycle or shred them.
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