No Tax Deduction for Giving Things Away on Craigslist
Just a warning to all the giveaway enthusiasts: there’s no tax deduction for giving things away to people on CL. I don’t worry about that, but here are a few ways to be able to get at least some deductions, and to cover some potential losses.
Make some donations to a nonprofit that will give you a receipt in excess of the actual value. I donate to Goodwill at least once a year, usually more, to get the receipt. It’ll say I donated $20 or $30 of stuff. Often, it’ll be something I bought from Goodwill for a lot less, or even clothes found for free.
Where to get free clothes? Just keep an eye open. People often put these on the curb, and they don’t often get picked up. I’m pretty certain about this, because we all have specific sizes, and the clothes likely do not fit when the random person goes by to pick through the clothes.
Sometimes, the big steel bins that are for dropping off clothes get full, and people leave bags next to the bins. Just take those. It’s not stealing, because it’s not inside the bin. The businesses nearby also appreciate that the bags aren’t there making it look messy.
Just take the clothes, wash them, and drop them off at the Goodwill, and you’ll get a big receipt that should reduce your taxes a little bit, and help defray the normal losses associated with giving stuff away on Craigslist.
I think it’s something like this:
Ever dollar deduction is like a small discount against your top tax rate. If your top tax rate is 15%, then every dollar deduction is like 15 cents in your pocket. A $100 deduction is like $15 in your pocket.
If you resell stuff, like I do, then the donation is a way to claim a loss against the value of your inventory.
If I have $500 of inventory (what I paid for it), and I donate $20 of inventory back, and claim that it’s worth $100, I get a $100 deduction against my taxes. Say that’s $15 in my pocket. Now my inventory is worth $480. I realize this sounds like a scam – the net effect is that I’m down $5 rather than $20.
The twist here is that you can’t just buy crap at Goodwill, donate it back, and get a big deduction. The deduction is for fair market value, and GW overprices a lot of their inventory. You need to pick out specific, high-value items, and then donate those back. (I’d rather sell those and get the income.)
What I do is donate only a sack of the very decent stuff, and get back maybe 2x or 3x what I paid as a deduction, and try to defray the losses from donating stuff to the street.