I took personal income tax law while I was in law school, and up until 2006, I always did my own taxes. This means I had a very clear understanding of IRS rules regarding the deduction of charitable goods. To have the best records (and therefore the greatest peace of mind), each item donated should be noted, along with its condition, value, date of donation, and recipient. (See IRS publication 526.) In practical terms, this means that I ought to be logging every T-shirt and sweater before it goes off to Goodwill. In practical terms, it means that over the years, I have donated items to Goodwill without logging them and therefore haven’t taken the deduction because I can’t back it up with proper records.
I’ve finally come up with a system for documenting every item we donate before it goes out the door. I keep a couple of paper grocery bags in a couple of different places in the house and toss things in when I decide I no longer want them. When the bags are full, I spread the contents out on the floor and take a photo – the way I would photograph a lot of items for sale on eBay. Then I grab an armful and log the items into a simple table I’ve created in a word processor (a spreadsheet would be even better, I just haven’t gotten around to it yet). After I enter an item, I put it back into the grocery bag. When I’m done with one load, I get another armful, until all items are back in the bags and ready to be loaded into the car. I print out the table and attach the Goodwill receipt to it so I know which Goodwill receipt applies to which list. (Goodwill receipts simply note that you donated X number of bags or items in certain categories.) I file the list and attached receipt in my tax file and forget about it til tax time.
A few years ago, I did use the Its Deductible book to log and estimate the value of my donations, but the amounts were so much higher than I thought they should be, I just wasn’t comfortable using them as the fair market value. But then, I tend to be quite conservative when it comes to deductions.
What do you do?