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Are Auction Items At A Charity Event Tax Deductible?

Monday, October 26th, 2015

When it comes to a charity auction, many people wonder if auction items are tax deductible. Donations and winnings are both tax deductible at a charity auction. However, as a donor or winner of charity auction items, it is beneficial to understand tax deduction regulations regarding donating items and winning items. It is also important to understand how to document items donated to or won from a charity auction.

Tax deduction regulations about donating items to a charity auction

If you donate an item to be auctioned off for charity, you can claim a tax deduction. The thing to keep in mind is that you can only claim the original amount you paid for a specific item. Your tax deduction will have nothing to do with the estimated worth of the item, or the amount the winner pays for the item at event. You can only legally deduct the item’s actual retail value. Even if the actual value of the item is higher, or the item sells for much more at auction, you must only deduct the item’s original value.

Tax deduction regulations about winning charity auction items

Winning items at a charity auction also allows you to take a tax deduction. You can claim what is called the item’s fair market value. This amount is calculated by subtracting the amount you paid for the item at auction from the item’s actual value. For instance, if you paid $12,000 for an item at auction, but the item is worth $8,000, you can deduct $4,000.

Also, you’ll need to be able to provide proof of what you paid for the item at the event. If you think the value of the item is worth more than cost estimated, you can claim more than the original item’s value. However, be prepared to tell the IRS how you arrived at the estimate for the item. Keep all receipts pertaining to the payment for the item and any research on pricing as documentation.

How to document items donated to or won from a charity auction

Whether you are donating or winning items at a charity auction, documentation is crucial when claiming tax deductions. If you won an auction item, you’ll need to keep any documentation relating to the transaction. You’ll also need to itemize your items using Form 1040, Schedule A. If you’re donating items to a charity auction, you’ll need an acknowledgment of receipt from the charity that documents the donation and how much it’s worth. This documentation is only necessary if you donate something worth more than $250. Anything worth more than $5,000 must be professionally appraised before a tax deduction is taken.

Would you like to know more about charity auctions or auctions in general? Contact the experts at High Plains Auctioneers by calling (806) 244-6776. You can also Contact Us by email to learn more about our services. Don’t forget to browse our upcoming auctions.