Avoid IRS Scrutiny with Proper Year-End Tax Deduction Planning

Released: November 26, 2008

HERNDON, Va. — Historical indications tell us, says the Center on Philanthropy at Indiana University, that despite the dismal economy this holiday season, a majority of people will still make charitable contributions. Charity Navigator notes that 50 percent of all charitable giving is done between Thanksgiving and New Year’s Eve.

“This year in particular is a great time to donate art before the prices fall further,” said Elin Lake-Ewald, an Accredited Senior Appraiser with the American Society of Appraisers. “Auction prices are just beginning to fall and it looks they will continue to sink in the coming year, so to maximize the tax deduction, it is a good idea to think about donating art now instead of waiting another year or two.”

In the last few years, the IRS has greatly increased their scrutiny of charitable donations so taxpayers need to review the regulations, document donations properly, and get donations appraised by a “qualified appraiser” when required by the tax code.

The IRS is now requiring that a “qualified appraiser” prepare a “qualified appraisal” for individual household items donated to charity which are worth more than $500. This is true also for other donated items such as art and antiques that have a fair market value of more than $5,000. The difference this year, notes the American Society of Appraisers, is that provisions of the Pension Protect Act, which was signed into law in August 2006, require that these appraisals be done by a “qualified appraiser.”

“The best way to find a ‘qualified appraiser’ is to use an appraiser who is accredited by a ‘recognized professional appraisal organization’ that complies with the Uniform Standards of Professional Appraisal Practice (USPAP),” said Susan Golashovsky, a Senior Accredited Appraiser member of the American Society of Appraisers.

Taxpayers should also make sure they are submitting an appraisal that was prepared using the correct valuation method for charitable contributions. All appraisals done for the Internal Revenue Service conclude the fair market value of the item or items. The fair market value is the amount that the item would sell for on the open market at the time of donation. Fair market value takes into account the condition of the piece or pieces, the value of sales of similar properties at the time, and the market for those types of items.

For more information, or to find an accredited appraiser near you or to learn more about appraisals, log on to www.appraisers.org or call (800) ASA-VALU.