People who donate building materials to Boston Building Resources often ask if they can deduct the value of their donation from their income taxes. The short answer is yes! But the longer answer is more complicated. And, for each individual, having a conversation with your tax preparer or accountant is essential. Here are a few basics to get you started.
When can I claim a deduction?
In general, if you itemize your deductions using Schedule A on the IRS Form 1040, you can claim a deduction for the fair market value of donated materials. The Reuse Center at BBR is a qualified charity. (“Boston Building Resources – Reuse Center” is a registered name of the Boston Building Materials Cooperative Charitable and Education Fund, which is a charity recognized as exempt from taxation by the IRS, with the tax ID number 04-2749815.)
What do you mean by “fair market value”?
This is the amount an item would sell for on the open market, with a buyer and a seller who are knowledgeable about the material being sold and under no pressure to act. This is not the same as the price you paid for an item when it was new; fair market value needs to account for the condition of the material and depreciation in value over time. Think of it as the price you would ask if you were selling the item on Craigslist. The IRS website has a more detailed description with examples.
What documentation will I need?
We suggest taking photos of the materials before they are donated. Keep the photos, along with the donation receipt you will receive from Boston Building Resources, with your other financial records as documentation of your donation. Digital photos can be stored in a cloud drive such as Dropbox, Evernote, or iCloud.
BBR’s donation receipt includes an itemized list of the materials donated, but will not include the value of the materials. The IRS does not permit charities to assign a value to non-monetary donations, so it is up to the donor to determine the value for tax purposes.
If the value of your donation is more than $500, you must fill out IRS Form 8283, “Noncash Charitable Contributions,” and attach it to your tax return. If the value is between $500 and $4,999, only Section A of the form needs to be completed.
What if my donation is valued at more than $5,000?
At this dollar level, you will need a qualified appraisal of the material (prepared by a third-party appraiser) and must also fill out Section B of IRS Form 8283. BBR cannot provide an appraisal of the donated material—only a list of the items that were donated. You will need to arrange for (and pay for) an appraisal separately.
Because third-party appraisals can cost $1,000 or more, it may or may not be worth the effort and expense to you. You and your financial consultant will need to decide if the amount to be saved in taxes will outweigh the cost of documenting the donation.
These guidelines apply to individual taxpayers. Charitable contributions of business inventory are subject to a different set of rules and should be discussed with the business’s tax preparer.
- IRS Publication 561: “Determining the Value of Donated Property”
- Nolo Law for All: “How to Value Noncash Charitable Contributions”
- Salvation Army Donation Value Guide
Boston Building Resources does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.