How to Determine Fair Market Value of Clothing

These shoes will only sell for a small fraction of their retail price in a thrift store.

Photo: Jupiterimages/BananaStock/Getty Images

The Internal Revenue Service (IRS) has created very specific rules about almost everything pertaining to taxes. It explicitly states which form you can use to file your taxes, the date by which the forms must be postmarked and which expenses qualify as educational expenses. Unfortunately, the IRS did not create specific rules about used clothing donations. IRS Publication 561, which is supposed to provide some clarification on the subject of clothing donations, simply states that the person making the donation is responsible for determining fair market value of the clothing. But the sheet fails to answer the question of how the fair market value of clothing should be calculated.

1.

Estimate how much you spent on the article of clothing and multiply that amount by 25 percent to find the fair market value, according to CFP Ken Pikor of Westerville, Ohio, in an interview for BankRate.com.

2.

Peruse the aisles of a local second-hand store and check the price tags of items that are similar to the ones that you plan to donate. Fair market value is based on how much an item can sell for, so knowing what similar items are selling for will help you make educated estimations.

3.

Use the Salvation Army's Donation Value Guide, which is available online. The list provides the minimum and maximum amount a customer would pay for a specific article of clothing. Evaluate the condition of each article of clothing to determine whether a customer would pay the maximum price, the minimum price or some amount in between.

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