You cleaned out your garage, donated a used car, or gave old business equipment to charity.
Feeling good—and hoping for a nice tax deduction?

Hold on.
The IRS has strict rules about how much you can deduct for noncash donations—and getting it wrong can trigger an audit, penalties, or even disallowance of your entire return.

Let’s break down what’s allowed, what’s not, and how to stay compliant.

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🔍 The Golden Rule: Fair Market Value (FMV)

Your deduction is based on Fair Market Value (FMV)—not what you paid, not what the charity says, and certainly not what a pricing guide lists for “retail.”

FMV = What a willing buyer would pay a willing seller—both with reasonable knowledge and neither under pressure.

For most used items, that means thrift store prices, not original cost.

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🚗 Special Rule: Vehicle Donations

If you donate a car, boat, or plane worth over $500, your deduction depends on what the charity does with it:

• If they sell it: Your deduction = the sale price (reported to you on Form 1098-C)
• If they use it: You may deduct FMV—but must get a written acknowledgment from the charity

⚠️ Example: You donate a car valued at $3,000, but the charity sells it for $800.
→ Your deduction = $800—not $3,000.

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🖼️ Art, Collectibles & High-Value Items

Donating art, jewelry, or collectibles worth over $5,000? You’ll need:

• A qualified appraisal by a certified appraiser
• Form 8283, Section B, signed by the appraiser
• Detailed documentation: artist, medium, condition, provenance

📌 Pub 561, p. 6: “An appraisal is not valid if the fee is based on a percentage of the claimed value.”

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💼 Business Inventory or Equipment

You can deduct the lesser of:

• FMV on the date of donation, OR
• Your adjusted basis (cost minus depreciation)

✅ Bonus: If you donate inventory to a food bank or school, you may qualify for an enhanced deduction under IRC § 170(e)(3).

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🧵 Household Items: Keep It Realistic

Used clothing, furniture, or electronics in “good used condition” are deductible—but only at thrift store value.

💡 Example: That $200 jacket you bought? Worth maybe $15 at Goodwill.
→ Claiming $200 = red flag.

📌 Pub 561, p. 5: “Items in poor condition generally have no FMV.”

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📑 Required Paperwork

Donation Value	What You Need
Under $250	Bank record or receipt
$250–$500	Contemporaneous Written Acknowledgment (CWA) from charity
Over $500	Form 8283 + CWA
Over $5,000	Qualified appraisal + Form 8283, Section B

⚠️ No Form 8283? The IRS will disallow the entire deduction.

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💬 Final Advice from Uncle Joe Tax

Charity is noble—but the IRS sees inflated deductions as abuse.
So be honest. Be accurate. And keep proof.

Because the best deduction isn’t the biggest one—it’s the one that holds up under scrutiny.

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🎁 Free Resource: Noncash Donation Tracker

Download our checklist to document every donation—so you claim what’s fair, and nothing more.

👉 [Get the Noncash Donation Tracker (PDF)]