Since we’re nearing year-end, it’s a good time to brush up on fair market value. Your donors need to know how much they can write off as a tax-deductible donation. A ticket to an event is an easy calculation – the write-off amount is the difference between the amount paid and the actual cost of goods, such as a dinner.
Donated goods are more complicated, so here is what the IRS says: “Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction.”
If the property was new or purchased close to the date of the event, the FMV is the price paid. If that is not the case, then consideration for the value includes the desirability, use and scarcity of the item. Three ways to determine the value of used property are:
– Sales of comparable properties
– Replacement cost
– Opinions of experts (appraisers)
There are many exceptions and variations based on the type of property. More detailed information can be found on the IRS Web site.