Questions about Charitable Donations in Kind

[broudie]

Hi, it's freezing in NY and I just dropped off almost 4000 pairs of surplus gloves (new with tags, that I manufacture) at the local Salvation Army as a charitable donation

What amount do I declare in my tax forms as a charitable donation? Cost to manufacture? Market price? MSRP?

[nealrm]

The price that a qualified tax expert says to use. :)

The internet and this forum is a great place to bounce ideas around or get general advice. But when it comes to tax and legal issue, free advise on forums is worth about the same as free advise in a bar at 2:00am. Talk to an accountant that handles taxes.

[tallen]

While nealrm is right, I will tell you that, as far as I know, the most you can claim is the cost to manufacture.

[Freelancier]

My understanding of the rules is similar to @tallen's: you can't claim a charitable deduction higher than your actual out-of-pocket costs for something new or the depreciated value of a used item. For example, a consultant cannot deduct their hours worked on a charitable project, because there's no actual out of pocket costs for your time (there's lost revenue, but that's not actually something coming back out of your pocket, so the IRS disallows that). You can't claim what you would sell the item for, because that amount didn't come out of your pocket (it just never went in, which is why they disallow that basis for the deduction).

But, yes, this is why you absolutely must have an accountant to handle these situations and to help you minimize your income tax exposure.

[broudie]

Makes sense to me. So basically the most I can claim is what my costs are. I'll double check with my accountant at tax-time but that's the number I'll go with. Thanks!

[Evan]

Yes, it'll be your costs (all of them). If it's not a charitable contribution, it'd be items otherwise not in inventory that would have been expensed to cost of sales when you do a physical inventory count at year-end.