IRS Publication 561: Valuing Donated Property

Fair market value sounds simple: the price a willing buyer would pay a willing seller, neither under pressure to act, both with reasonable knowledge of the facts. In practice, it's anything but simple.

The IRS doesn't accept what you paid for the item. It doesn't accept what the item means to you. It accepts what the item would sell for on the open market on the date you donated it. That distinction trips up thousands of taxpayers every year.

Three factors the IRS weighs most heavily:

• Condition: A couch with a torn cushion isn't worth what a pristine one is. Clothing must be in "good used condition or better" to qualify for any deduction at all.
• Comparable sales: What have similar items actually sold for? The IRS looks at thrift stores, consignment shops, eBay completed listings, and dealer prices.
• Market context: A donated car's FMV depends on whether the charity uses it or sells it. If they sell it for $3,000, your deduction is $3,000 — regardless of Blue Book value.

The 2026 tax landscape adds urgency. With the standard deduction at $32,200 for joint filers, many taxpayers who previously itemized now take the standard deduction. But the new above-the-line cash donation deduction ($2,000 for joint filers) doesn't cover noncash property. To deduct donated goods, you must itemize — and clear the new 0.5% AGI floor.

Pub 561 provides specific guidance for each category. Here's what matters most.

Household goods and clothing — Use thrift shop or resale value, not replacement cost. A suit you bought for $800 that a thrift shop sells for $30 has an FMV of $30. Items must be in good used condition or better. The IRS can deny any deduction for items in poor condition unless you get a qualified appraisal for items claimed at over $500.

Vehicles, boats, and aircraft — If the charity sells the vehicle without significant use or improvement, your deduction is limited to the gross sales proceeds. The charity must provide you Form 1098-C within 30 days of the sale. If the vehicle's claimed value exceeds $500, you must attach Form 1098-C to your return.

Publicly traded securities — The easiest to value. FMV equals the average of the high and low trading prices on the donation date. If you've held the stock for more than one year, you deduct the full FMV and avoid capital gains tax entirely. This makes appreciated stock one of the most tax-efficient donation methods available — you bypass capital gains tax on the appreciation while deducting the full current value.

Real estate — Always requires a qualified appraisal for donations over $5,000. The appraisal must be conducted no earlier than 60 days before the donation and no later than the tax return due date. Conservation easements have drawn intense IRS scrutiny — syndicated conservation easement transactions are listed transactions as of 2022.

Art and collectibles — Donations of art valued at $20,000 or more require attaching the complete appraisal to your return. For art valued at $50,000+, you can request a Statement of Value from the IRS Art Advisory Panel before filing. The panel reviews about 1,500 items annually and adjusts claimed values on roughly 40-50% of submissions.

The thresholds are non-negotiable:

• $250–$500: No appraisal needed, but you need a written acknowledgment from the charity.
• $501–$5,000: Complete Section A of Form 8283. No appraisal required, but you must describe how you determined FMV.
• Over $5,000: Qualified appraisal required. Complete Section B of Form 8283. The appraiser must sign the form.
• Over $500,000: Attach the full appraisal to your return.

These thresholds apply per item or per group of similar items. Donate five paintings worth $2,000 each? That's $10,000 in art — you need an appraisal.

Exceptions where no appraisal is needed regardless of value: publicly traded securities, vehicles where deduction is limited to sale proceeds, and intellectual property.

What makes an appraiser "qualified"? They must have earned an appraisal designation from a recognized professional organization or meet minimum education and experience requirements. They cannot be the donor, the donee, or a party to the transaction. The appraisal itself must be performed no earlier than 60 days before the donation date.

The penalty for a "substantial" or "gross" valuation misstatement is real: 20% of the underpayment for overstatements of 150% or more of correct value, and 40% for overstatements of 200% or more.

The One Big Beautiful Bill Act made three changes that directly affect how you should think about noncash donations in 2026.

The 0.5% AGI floor for itemizers. If your AGI is $200,000, the first $1,000 of your charitable deductions is now disallowed. At $500,000 AGI, you lose $2,500 off the top. This means smaller noncash donations — a bag of clothes to Goodwill worth $150 — contribute almost nothing to your deduction if you're a higher earner. Focus your noncash giving on larger, well-documented donations that clear the floor.

The 35% cap on itemized deduction value. Taxpayers in the top federal tax bracket now get only 35 cents of tax benefit per dollar of charitable deduction, down from 37 cents. The math still favors donating appreciated stock over cash — you avoid capital gains and get the deduction — but the marginal benefit is slightly lower.

Non-itemizer above-the-line deduction. The new $1,000/$2,000 deduction applies only to cash donations to operating charities (not donor-advised funds or private foundations). Noncash property donations don't qualify. If you're a standard-deduction filer with appreciated stock to donate, you'll need to run the numbers on whether itemizing for that donation alone is worth it.

With the Fed funds rate at 3.64% and CPI running 3.3% year-over-year as of March 2026, inflation continues to push up the replacement cost of goods — which is not the same as FMV. Don't confuse what it would cost to buy a new version of your donated item with what the used item actually sells for.

The IRS flags noncash donation deductions at a higher rate than almost any other line item. These are the mistakes that trigger scrutiny.

Using replacement cost instead of resale value. Your $1,200 treadmill that's five years old isn't worth $1,200. Check what comparable used treadmills sell for on eBay or Facebook Marketplace. That's your FMV — probably $200-$400.

Failing to reduce FMV for ordinary income property. If you donate property that would have generated ordinary income (rather than long-term capital gain) on sale — inventory, short-term holdings, artwork you created — your deduction is limited to your cost basis, not FMV.

Missing the contemporaneous written acknowledgment. For any single donation of $250 or more, you need a written receipt from the charity before you file. "Contemporaneous" means obtained by the earlier of: the date you file your return, or the due date (including extensions). No receipt, no deduction — the Tax Court has upheld this requirement even when the donation itself was undisputed.

Bunching without planning. With the higher standard deduction and the new AGI floor, bunching — concentrating two years of donations into one year to exceed the itemization threshold — is more valuable than ever. But bunching noncash property requires getting appraisals in the right tax year. A qualified appraisal obtained in January for a December donation won't work if the appraisal date is after the donation date by more than 60 days.

Ignoring the IRA charitable rollover. If you're 70½ or older, qualified charitable distributions (QCDs) from your IRA — up to $105,000 in 2026 — count toward your required minimum distribution but aren't included in AGI. This sidesteps the entire itemization question and the AGI floor.