According to the Bureau of Labor Statistics, the average American family spends $1,700 a year on clothes. That seems a bit low to me. That sounds more like a regular trip to the Bergen Mall for the average Jewish family in this area. Another telling statistic is that in 1930 the average woman had nine outfits. Today, that figure is 30 outfits—one for every day of the month. Now, that sounds more accurate to me.

Here’s a freebie tip to all the husbands out there: when your wife says she’s going to the mall to do returns, she’ll come back with more bags than she left with. If you’re like I used to be, you probably thought that returns merely meant returning purchased items to the store. But apparently there’s an extra step involved, which is purchasing new items afterwards so you can keep the return-purchase-return cycle alive and kicking.

But whether your family spends $1,700 or $17,000 a year on clothes, chances are you have a ton of clothes in your house taking up much-needed space. Instead of just throwing it in some oversized donation bins, you should be maximizing your tax deductions by donating it properly. But before you claim the deduction, you need to know: (1) how to calculate the amount of the deduction and (2) what records you need to keep to prove the deduction to the IRS, if needed.

Here’s another freebie tip. As of 2006, you can no longer donate used socks or underwear and get a tax deduction. You’re probably thinking, “What kind of disgusting human being would donate used underwear?” Not surprisingly, the answer is Bill Clinton. That’s right; the POTUS himself deducted $6 for three pairs of used underwear on his 1986 tax return, and now we’re all paying the price. Bottom line: if you were planning on donating used underwear then you may have bigger issues than not getting a tax deduction, anyway.

Calculate Your Tax Deduction: First, you’ll need to figure out how much to deduct on your tax return. If you’re like most people, you have a bunch of garbage bags full of stuff which you know you spent thousands of dollars on but have no idea how much you can actually deduct for them. The tax law says you can deduct the fair market value for the items. But even though you paid $300 for that suit, that doesn’t mean the fair market value is anywhere close to that figure. Fair market value is essentially what it would sell for in a thrift store. So one method is to actually do your own research and place a value on each item based on what it would sell in a thrift store. That’s all and good if you’re donating one or two expensive designer suits, but if you have ten bags of clothes it’s not feasible to find the value for every single item.

Luckily, there are several resources available online that estimate the fair market of clothing. The Salvation Army provides a free guide on their website. Not to be outdone, Goodwill also has a free guide on their website. Itsdeductible.com by TurboTax also provides a free guide as long as you provide them your email address. Finally, www.charitydeductions.com has a guide for $24.95, but this will provide more accurate quotes for specific clothing items since it researches the sales prices on eBay. Charitydeductions.com is worth shelling out the extra $25 for if you have some expensive designer clothing to unload.

Records to Keep: Now the question is what documentation do you need to prove the amount of the deduction. When you donate clothing, the records you need depend on the value of your deductions. The IRS has four categories: (1) Less than $250 (2) Between $250 and $500 (3) Between $501 and $5,000 and (4) Over $5,000.

Less than $250: Ideally, the receipt you get from the charity should contain the name of the charity, the date and location of your contribution, and a description of the property. This sounds easy enough, but, in practice, most receipts you get will not have a detailed description of the property. The charity will simply give you a blank receipt with their information on it for you to fill out yourself. This is why I recommend one extra step—every time you donate clothes you simply lay them out and take a few pictures of them and simply stick the pictures in a file. Should the IRS question the value of your donation, the pictures will provide proof as to what you donated.

Between $250 and $500: The record-keeping requirement is the same as if it was less than $250, except the charity should also have a statement on the receipt that they did not provide any goods or services in return for your donation. Again, this is the ideal. In practice, if your receipt doesn’t have this statement on it, I would not expect the IRS to deny your tax deduction.

Between $501 and $5,000: Your record-keeping requirements will depend on the value of individual items. If there is no single item valued over $500, but merely the aggregate value is over $500, then you have the same record-keeping requirements as the group just above. However, if you valued one or more single items over $500 then you must provide (1) the approximate date you acquired the item (2) how you acquired the item (i.e. purchase, gift), and (3) what the cost you paid or someone else paid for the item originally. If you valued an item over $500 that is not in “good condition” or better, then you will also need to get a qualified appraisal for the item and include it with your tax return.

Over $5,000: For a deduction over $5,000 you’ll need to get a qualified appraisal for the clothing and include it with your tax return.

Daniel Magence, CPA, Esq. is a principal at Pristine CPA Solutions, LLC (www.pristinecpa.com). Pristine CPA Solutions offers tax and accounting services to individuals and businesses of all sizes, whether it’s tax returns, bookkeeping, payroll services or personal income budgeting. He can be reached at [email protected] or 201-326-6908 if you have any questions or comments, or are interested in using Pristine CPA’s services. Feel free to contact us for a free consultation.

By Daniel Magence, CPA, Esq.