How to Value Donations for Tax Purposes: Appraisals and Penalties

To value donations for tax purposes, you use fair market value: the price the property would sell for between a willing buyer and a willing seller who both know the relevant facts and neither of whom is under pressure to close.¹ For most donated property, that’s the used resale price, not what you paid new. The specific method depends on what you’re donating, and the paperwork you need scales up with the dollar amount, from a simple receipt for a bag of clothes to a qualified appraisal signed under penalty of perjury for artwork or real estate.

What Fair Market Value Actually Means

Fair market value is not what you paid, not what you wish it were worth, and not the cost of replacing it new. It’s what the property would realistically change hands for on the open market. Several factors go into that figure: the item’s condition, comparable sales of similar property, replacement cost, and expert opinions. No single factor controls, and the IRS expects you to weigh them together and land on a reasonable number.

The burden of proof rests entirely on you. How you arrived at the value matters as much as the value itself, so keep the comparables, photos, receipts, and any appraisals that back up your figure.

Clothing and Household Items

For everyday donations like clothing, furniture, and appliances, the benchmark is what thrift shops and consignment stores actually charge for comparable used items.¹ Online auction sites and resale platforms can supply comparable prices too, but look at completed sales, not asking prices.

There’s a condition rule that catches donors off guard. Clothing and household items must be in good used condition or better to qualify for any deduction.² Worn-out shirts, stained furniture, and broken appliances don’t count. The narrow exception: you can still deduct an item in less-than-good condition if you claim more than $500 for it and attach a qualified appraisal to your return. Few individual household items clear that bar.

Photographs taken before you drop the items off are cheap insurance. If the IRS questions your figure, images of the condition give you something concrete to point to.

Stocks and Appreciated Property

Publicly traded securities are the easy case. The FMV of donated stock or bonds equals the average of the highest and lowest selling prices on the date of the gift.³ If the stock traded between $9 and $11 that day, FMV is $10.

The holding period drives what you can deduct. For long-term appreciated property held more than one year, you can generally deduct the full FMV without recognizing the built-in capital gain. Donate stock bought at $20 that’s now worth $100, and you deduct $100 and never pay tax on the $80 of appreciation.

The rule flips for property held one year or less, and for property that would generate ordinary income if sold (business inventory, or artwork you created yourself). Your deduction for those assets is limited to your cost basis, generally what you paid. Most valuation mistakes with appreciated assets happen at this line, so the holding period matters.

Vehicles

Vehicle deductions are tighter than most donors expect. If the charity sells your car, your deduction is generally limited to what the charity actually receives from the sale, not the blue book value.⁴ A car you think is worth $5,000 that sells at auction for $1,200 gives you a $1,200 deduction.

Three exceptions let you claim full FMV instead:

The charity uses the vehicle substantially in its operations, such as delivering meals or transporting clients.
The charity makes material improvements that significantly raise the vehicle’s value, not just cleaning or minor repairs.
The charity gives the vehicle, or sells it at a steep discount, to a person in need in furtherance of a charitable purpose.

The charity has to give you a written acknowledgment, usually Form 1098-C, within 30 days of the sale or contribution, documenting which situation applies. Without that form, the IRS will disallow the deduction.⁴

Real Estate, Art, and Other High-Value Property

Real estate, fine art, jewelry, and closely held stock don’t have transparent daily prices, so the IRS relies on qualified appraisals. For art valued at $20,000 or more, the full qualified appraisal must be attached to your return.¹

A real estate appraisal has to describe the property’s condition, the valuation method used (comparable sales, income approach, or replacement cost), and the specific basis for the conclusion.⁵ The appraiser signs a declaration acknowledging potential penalties for misstatements. Residential real estate appraisals typically run from a few hundred to over a thousand dollars.

Cryptocurrency and Digital Assets

The IRS treats digital assets as property. You establish FMV at the time of the gift, and the same holding-period rule applies: more than one year lets you deduct full FMV, one year or less limits you to cost basis.

If your claimed deduction for donated digital assets exceeds $5,000, you need a qualified appraisal and must report the gift on Section B of Form 8283.⁶ Unlike listed stock, there’s no single official exchange price for crypto, so document the pricing index you used and the timestamp of the transfer.

When You Received Something in Return

If you got a benefit from the charity, subtract its value from your payment. Pay $200 for a charity dinner where the meal is worth $80, and your deductible contribution is $120.

Charities must give you a written disclosure statement for any quid pro quo contribution over $75, with a good-faith estimate of the goods or services you received.⁷ Ask for it if it doesn’t arrive. The obligation to reduce the deduction is yours regardless.

Documentation That Scales With Value

The paperwork requirements step up at defined thresholds, and missing a step can void the deduction entirely.

For any single contribution of $250 or more, you need a contemporaneous written acknowledgment from the charity. It must state the amount of cash or a description of the property, whether the charity gave you anything in return, and a good-faith estimate of the value of any benefit received.⁸ “Contemporaneous” means you have it in hand by the earlier of the filing date or the return’s due date with extensions. A receipt requested after an audit notice arrives won’t work.

For non-cash donations totaling more than $500, file Form 8283 with your return.⁹ Section A covers items (or groups of similar items) with claimed deductions between $501 and $5,000: charity name, description, date acquired, cost basis, claimed FMV. Section B covers items above $5,000 that require a qualified appraisal, and both the appraiser and the receiving charity sign it.

Keep receipts, acknowledgment letters, appraisals, and photographs for at least three years after filing, which is the general audit window.¹⁰ If cost basis matters to your deduction, keep those records longer.

When a Qualified Appraisal Is Required

The $5,000 threshold is the bright line. For any single item or group of similar items where your claimed deduction exceeds $5,000, you must obtain a qualified appraisal from a qualified appraiser and file Section B of Form 8283.¹¹ The appraisal must follow the Uniform Standards of Professional Appraisal Practice and be signed no earlier than 60 days before the donation date and no later than the return’s due date including extensions.⁵

A few categories are exempt from the appraisal requirement even above $5,000: publicly traded securities, because pricing is transparent, and certain vehicles where the deduction equals the charity’s sale proceeds. For everything else over the threshold, no appraisal means no deduction. If the claimed deduction for any item exceeds $500,000, the full appraisal has to be physically attached to the return.¹²

Reporting the Donation on Your Return

Charitable deductions go on Schedule A of Form 1040, which means you have to itemize. Attach a completed Form 8283 for non-cash donations over $500.⁶ Filing electronically? Attach it as a PDF. Filing on paper? Include the physical form with all required signatures.

For property requiring an appraisal, both the appraiser’s signature and the charity’s acknowledgment on Section B of Form 8283 are mandatory. A missing signature is treated the same as a missing appraisal. Returns with attached appraisals or large non-cash deductions may draw additional review.¹³

Penalties for Getting the Value Wrong

A 20% accuracy-related penalty applies when the value you claim is 150% or more of the correct amount. If the overstatement reaches 400% or more, the penalty doubles to 40%.¹⁴ The penalty applies to the tax underpayment caused by the misstatement, on top of losing the excess deduction itself.

The math gets ugly quickly. Claim $15,000 for furniture actually worth $3,000, and that’s a 500% overstatement in the gross-misstatement range. The IRS disallows the excess deduction and adds 40% of the resulting underpayment. The combined hit routinely exceeds any tax benefit the aggressive number would have produced.

Defensible valuation is the protection: comparable sales for common items, qualified appraisals for high-value property, and an honest read on condition. Conservative figures rarely draw scrutiny.

AGI Limits and Whether You Benefit at All

Even a perfect valuation runs into ceilings. Cash donations to public charities are capped at 60% of adjusted gross income. Long-term capital gain property to public charities is capped at 30% of AGI. Private foundations face lower limits. Contributions above the applicable limit carry forward up to five years (15 years for qualified conservation contributions), oldest carryover used first, with the same percentage limits applying in each carryover year.²

Starting in tax year 2026, itemizers face additional limits: charitable contributions are only deductible to the extent they exceed 0.5% of AGI, and taxpayers in the 37% bracket face a 35% cap on the value of their charitable deductions.

One threshold matters before any of this: you have to itemize on Schedule A to claim a charitable deduction at all.¹² For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.¹⁵ If your total itemized deductions don’t clear that number, valuing the donation carefully produces no tax benefit at all.

1
Internal Revenue Service. Publication 561 (12/2025), Determining the Value of Donated Property
2
Internal Revenue Service. Publication 526 (2025), Charitable Contributions
3
Internal Revenue Service. Publication 561 (12/2025), Determining the Value of Donated Property – Section: Stocks and Bonds
4
Internal Revenue Service. IRS Guidance Explains Rules for Vehicle Donations
5
eCFR. 26 CFR 1.170A-17 – Qualified Appraisal and Qualified Appraiser
6
Internal Revenue Service. Instructions for Form 8283
7
Internal Revenue Service. Charitable Contributions – Quid Pro Quo Contributions
8
Office of the Law Revision Counsel. 26 USC 170 – Charitable, etc., Contributions and Gifts
9
Internal Revenue Service. About Form 8283, Noncash Charitable Contributions
10
Internal Revenue Service. How Long Should I Keep Records?
11
Internal Revenue Service. Publication 561 (12/2025), Determining the Value of Donated Property – Section: Substantiation of Noncash Charitable Contributions
12
Internal Revenue Service. Topic No. 506, Charitable Contributions
13
Internal Revenue Service. Processing Status for Tax Forms
14
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
15
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments from the One Big Beautiful Bill