Give Junk Away and Reduce Your Taxes
By Joseph S Reisman

Everybody is having a yard sale to get rid of the old clothes and ‘stuff’, and the question is whether it is better to have a yard sale or donate to a charity. The answer is, it depends. 

First, you need to determine a fair value of the merchandise. Most people undervalue the sweaters, typewriters, bicycles, etc. A reasonable rule of thumb for tax purposes is to use 50 percent of the original purchase price if you were the owner for only one year; 40 percent if for two years; 30 percent if for three years; and 25 percent thereafter.

Once you determine what you might receive from the yard sale, you compare that with the amount you’ll save on your taxes.  How?

1. Determine the fair value of the merchandise.
2. Ask your tax preparer for your tax bracket.
3. Estimate how much you will make at the yard sale.

If the fair value of the merchandise is $1,000, and your tax bracket is 15 percent, then you will save $150 on your taxes.

If the fair value of the merchandise is $1,000, and you guesstimate you will take in more than $150 at the yard sale, then you will have that in your pocket.

Therefore, if you enjoy organizing and selling, turning your front yard into a colorful field of used items, and again proving that one man’s junk is another’s treasure, then the yard sale is for you.

If however, you are going the path of least resistance, then you need to do some homework.

First, make a detailed list of your donation, including what you’re donating, the number of items, and their condition.

Second, as stated above, determine a fair value of the merchandise. If you have the original receipts, you’re ahead of the game, but if not, use approximate dates and amounts. Take a picture of what you’re giving away to prove what you are giving away (and keep it with your tax records).

Third, give your items to a qualified (tax-exempt status) organization. You can ask the charity if it is qualified; get the literature from the organization stating that it is fully recognized by the IRS; or check IRS Publication 78, Cumulative List of Organizations, which lists most organizations. 

Fourth, get a SIGNED and DATED receipt from the organization. Do NOT just take your old clothes, shove them into a bag, and throw it into a dumpster, or leave it by your front door for pickup.

Also, if you have a relative who dies, or moves to a nursing home, you may have a bigger yard sale composed of linens, furniture, utensils, and more, or a larger deduction  – and quite a large one at that.

Happy Spring Cleaning.

Questions: Contact Joseph Reisman at 2751 Coney Island Avenue, Brooklyn, NY 11235-5004
Tel: 718-332-1040; Fax: 718-743-2721; E-mail: JSReisman@TaxHelp1040.com;