You can generally deduct the fair market value of donations of property. You may be able to determine the fair market value of used clothing and other used items by checking the prices for comparable items in used clothing stores or outlets, or consignment or thrift shops. Newspaper ads, or online auctions may be a source of information on the value of used furniture, equipment, and other items. The fair market value of more valuable items, such as paintings, antiques and objects of art, should be supported by an appraisal. If you donate a vehicle, you may be able to use the blue book value, taking into consideration the condition of your vehicle.
Property that has Decreased in Value
If the value of the property that you donate has decreased and is less than your cost or other basis in the property, your charitable contribution deduction is limited to the fair market value at the time of the donation. You cannot claim a deduction for the loss in value.
Property that has Increased in Value
If the value of the property has increased and is more than your cost or basis, you may have to reduce the fair market value of the property by the amount of appreciation when you calculate your charitable contribution deduction. Different rules apply, depending on whether the property is considered to be ordinary income property or capital gain property.
Ordinary Income Property
Property is considered to be ordinary income property if its sale at fair market value would result in ordinary income or short-term capital gain for tax purposes. This category includes inventory, works of art created by the donor, and capital assets held one year or less. The amount you can deduct as a charitable contribution would be the fair market value less any gain you would realize if you sold the property. In other words, your deductible contribution would be your basis in the property.