Tax Benefits in the Sue Moore Auction

[Bricksville]

The rules are kind of vague and a little misleading in the Sue Moore Auction FAQ, so I thought I'd lay out the tax benefits of participating. Most importantly, your purchases are not tax deductible just because the check is made out to a charity. The tax benefits are to the contributors, not the bidders. Here's how it works in a nutshell:

1. If you buy an item, you don't get a tax deduction for what you paid. Unless what you paid is greater than the fair market value of the item. It's not a charitable contribution by you if you just buy something at fair value, even though your check is to the Sue Moore Foundation. If you pay more than fair market value, your deduction is the amount you "over paid".

2. If you donate an item, you get a full tax deduction for the value of the item you donated. You can deduct the fair market value of the item, including your shipping cost. Good news: If the item sells for less than fair value, you still get to deduct fair value, because that's what you've given. The donor has actually given something away for free. He gets the tax deduction. Which makes sense.

3. Think of it this way: You get a tax deduction to the extent you've given something away, not for what you pay. If you pay $500 for a $100 razor, you get a $400 deduction. If you pay $100 for a $100 razor, you get no tax deduction. If you donate a $100 razor and pay $10 to ship it, you get a $110 deduction.

Your tax benefit is to the extent of your charity. You can't buy something (get a deal) in a charity auction and claim a tax deduction for the full purchase price just because it was a charity auction. But if you donate an item you get a full deduction for the value of the item even if it sells for chump change.

Make sense?

Hope this helps. Guys, you want to be donors to this auction.

 

[Mtn Man]

That is a good explanation. Thanks for posting.

 

[bobmsp]

You may want to check with your tax advisor about the mechanics of these specific auction transactions to confirm deductibility of donations since the items are not donated directly to a charitable organization.

(Not legal advice, just a friendly suggestion. Although I sometimes deal with tax issues in my line of work, I’m not an expert by any means. So do your own research. )

 

[ajkel64]

I have not bothered keeping receipts for my donated items as I live outside the U.S.A. and I don't think that I would get a tax deduction from donating outside of Australia. And in the end I do not really care as long as someone finds a cure for cancer.

 

[TexLaw]

You may want to check with your tax advisor about the mechanics of these specific auction transactions to confirm deductibility of donations since the items are not donated directly to a charitable organization.

That's really the trick of this whole thing.