If you’re tempted to buy the latest computer as soon as it hits the market, think wisely about what to do with your obsolete model. Take advantage of an opportunity to generate tax savings on your 2016 return.
Strategy: Donate the PC to a qualified charitable organization. Usually, you can deduct the full fair market value (FMV) of the electronic device. As a result, you’ll get a tax deduction for property you were going to discard.
Keep detailed records in case the IRS challenges you. Otherwise, you may not qualify.
Here’s the whole story: Generally, you can claim deductions for used personal property that you donate to a qualified charity. The deduction amount for property that has depreciated in value—such as a computer or laptop—is equal to its FMV on the date of the donation. But you must meet strict IRS record-keeping requirements to nail down the deduction.
There are three key tax rules to observe for donations of property.
1. Obtain a receipt for each contribution made to charity that includes the donor’s name, date and location of the contribution and a detailed description of the property (to the extent possible). You may fill in the description yourself.
2. When you file your tax return, complete Schedule A of Form 8283, Noncash Charitable Contributions, if you contribute property (other than certain publicly traded securities) valued at a total of more than $500.
3. For contributions valued at more than $5,000, fill out Schedule B of Form 8283 and attach a written appraisal of the property’s value.
The IRS has been known to nitpick, especially when it comes to independent appraisals.
Tip: The charitable appraisal itself is deductible as a miscellaneous expense subject to the usual floor of 2% of adjusted gross income.