How Decluttering May Save You Money at Tax Time

Our family has been been decluttering the past several months. It's not that we are hoarders or anything, we just tend to hang onto stuff thinking that someone might want it in the future. After 30 years of storing this stuff, we've finally determined that no one wants our old junk after all, darn it, and it's time for it to go away.

There are all sorts of advantages to decluttering your home. For one thing, having more space and a tidier place to live is a huge bonus. Finding long lost valuables is also a definite plus. There's yet another big advantage to decluttering that most people never think about; that is, decluttering may actually save you money at tax time.

If you itemize deductions on IRS Form 1040 Schedule A, donating your clutter to a qualifying non profit may reduce your federal tax liability. In some states, these donations may also reduce your state tax liability for a double bonus.

Of course, I'm using the term "clutter" loosely here. Things like scraps of paper, orange juice cans, a stash of empty Cool Whip containers, and other clutter of that type has no value and can't be donated in hopes of receiving a tax break. What can be donated to a qualifying non profit are household items in good used condition or better. These include gently used items such as furniture, clothing, toys, appliances, room decor, electronics, and linens.

There's a few points worth remembering when donating your household of clutter to charity.

1. Charitable contributions are only deductible if you itemize deductions of the 1040 Schedule A. However, your state may allow you to deduct charitable donations even if the Feds won't ~ your accountant is the person to check with regarding eligible deductions at the state level.

2. Charitable contributions must be made to qualifying nonprofit organizations. (Publication 526 can give you the run down of qualifying organizations.)

3. Donations of over $500 require Form 8283 for Noncash Charitable Contributions to be submitted with your tax return. The information needed on Form 8283 includes the name & address of the organizations receiving the donation, a description of the donated property, and an estimate of the property's total worth. (publication 561 at IRS.gov can help you there.) To keep track of the stuff we donate, I jot down a comprehensive list of all the donated items as they are boxed up along with an estimated value. This list is then attached to our charitable donation receipt and filed away until tax time.

Donating your clutter is a great way to clean out the house and get your life back in order. And for those of us interested in paying less taxes, decluttering may even generate some tax savings come April 15.

For more information about charitable deductions for both your federal and state tax returns, your accountant can help.

resources:
http://www.irs.gov/newsroom/article/0,,id=106990,00.html
http://www.irs.gov/publications/p561/ar03.html