22

Context: I am selling a camera on facebook marketplace and someone proposed the following:

Person: Would you consider a fully tax deductible Donation to a San Francisco arts non-profit?

Me: Wait what does that mean? I can get all of that money from my tax back?

Person: That you can write it off at the end of the year and get the money back with taxes. You would also help an Amazing photography non profit. Our gallery is in north Beach San Francisco.

My camera is worth roughly 2000 USD and I definitely paid more than that in my federal and state this year.

Assuming this person is legit, meaning they work for an actual non profit and they can issue me the documentation for this transaction, is this an offer worth considering?

Chris W. Rea
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Tinker
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    A tax deduction is not the same as a tax credit. – Mattman944 Oct 11 '22 at 14:29
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    They are not offering a payment. They are asking if you'd be interested in donating the camera instead. – Alex B Oct 11 '22 at 17:16
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    The proper response to such offers is "Gedouttahere!" – TonyK Oct 11 '22 at 18:14
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    @TonyK unless you think it's a worthy charity and would rather avoid the hassle of selling the thing. – Seth R Oct 11 '22 at 23:58
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    @SethR: A San Francicso arts non-profit... – TonyK Oct 12 '22 at 00:10
  • So many good answers here... this is quite overwhelming – Tinker Oct 12 '22 at 07:07
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    Youre getting scammed. Youre giving away a $2000 camera for possible $740 in value, not available until after the tax year, and you're not even guaranteed the IRS will accept it without an argument (and incurring more costs via your tax agent) – vikingsteve Oct 12 '22 at 11:57
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    @vikingsteve Asking for donations is not a scam. – gerrit Oct 12 '22 at 13:46
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    The question-title sounded like someone was claiming that they'd pay you by making a tax-deductible donation on your behalf. – Nat Oct 12 '22 at 15:24
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    @gerrit pretending to receive donations for a charity which you actually have no relation to is, however, a scam (though I'm not saying I suspect that's happening here) – llama Oct 12 '22 at 17:25
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    @gerrit : it is, if they are lying and telling that the seller can get all the money back as tax deductions. And this is exactly what they're doing. The seller is lucky to get back 1/3 of the price as tax deduction, but as several answers state it, it can even be way less. – vsz Oct 13 '22 at 13:50
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    @gerrit But it is if they misrepresent how it would benefit OP through taxes – Radvylf Programs Oct 13 '22 at 14:26
  • @Gerrit Of course asking for donations is not a scam, in or of itself and until you show us otherwise, that's not what's happening here… is it?

    How is the point here not, as Radvylf Programs already asked you, the apparent misrepresentation of how it the deal might benefit OP?

     – Robbie Goodwin Oct 19 '22 at 19:30
  • @RadvylfPrograms Still not sure if that counts as a scam. It could be a genuine misunderstanding. From how I understand the posts here, it's true for people who pay a lot of taxes and itemize their deductions, and someone who is not aware of the subtleties between standard and itemized deduction in the US may believe it's true in general (I believe it's true in Germany, but then maybe I'm wrong and am making mistakes in my tax declarations). Plus donating stuff rather than money makes it more complicated. See also Hanlon's Razor. – gerrit Oct 20 '22 at 08:48

8 Answers8

37

Is it worth considering? It's up to you, of course, how can we tell.

The proposal is this:

You donate your camera to the non profit. The non-profit provides you an appropriate receipt for the donation. You need to substantiate the value of the camera (appraisal, or do some shopping online to find similar cameras and how much they're being sold for). You then use form 8253 to report this donation on your tax return, and if eligible - deduct it on your schedule A.

In order for the donation to be deductible you need to get a receipt from the non-profit at the time of the donation, that must contain certain information:

  • name of the organization;
  • amount of cash contribution;
  • description (but not value) of non-cash contribution;
  • statement that no goods or services were provided by the organization, if that is the case;
  • description and good faith estimate of the value of goods or services, if any, that organization provided in return for the contribution; and
  • statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case.

Obviously, you need to confirm that the organization you're contributing to is in fact a charitable (a 501(c)(3)) organization. The IRS has a search tool.

Depending on your tax situation, you can estimate the tax benefit. Assuming you're a high earner in the top (37%) marginal bracket and are already itemizing deductions, your maximum tax benefit would be 37% of $2000 = $740 (in Federal taxes). Obviously much less than the actual $2000 value of the camera, but then again - you donated for a good cause. If it is in fact good, in your view.

littleadv
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    I'm not disagreeing with the math shown but in my (limited) experience people drastically overestimate the value of taxable donations. Less than 15% (according to taxpolicycenter.org) of US taxpayers itemize. While the donation could be worth $740 the most likely outcome for the vast majority of Americans will be spending five extra minutes entering the form when they file their taxes (or giving it to their tax professional) and still taking the standard deduction with a $0 difference in their tax due. – Rob P. Oct 11 '22 at 16:33
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    @RobP. that's why I said "assuming you're ... in the top ... bracket and are already itemizing". These are strong assumptions, but I must say that for someone living in the Bay Area considering donating a $2K camera - probably not unreasonable ones. – littleadv Oct 11 '22 at 16:35
  • And for those outside California - owning a 1bd1ba condo in the Bay Area and a salary of ~120-150K (by no means wealthy) would bring you over the 10K in taxes. – littleadv Oct 11 '22 at 18:57
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    @littleadv What does owning a condo have to do with the 10k SALT threshold? Do income tax deductions take property ownership into account somehow? – Brian Oct 11 '22 at 21:21
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    @Brian property taxes (the L in SALT) – littleadv Oct 11 '22 at 21:22
  • Huh, I thought SALT deduction was only for income tax. TIL. – Brian Oct 11 '22 at 21:36
  • There is some room for interpretation in the appreciation of donated items. You cannot claim it's worth $10,000 but you may think that an enthusiast would cough up $3,000, making the tax savings around $1100 instead of around $750. If you secretly fear you may actually only sell it for $1500 or, heaven forbid, $1200 because cameras experience obsolescence faster than my mother in law: Suddenly the deal doesn't look that bad. This is essentially why Goodwill is attractive: Have you ever actually tried to sell that garbage!? ;-) – Peter - Reinstate Monica Oct 14 '22 at 14:51
21

You won't get 2000 USD. You are asked to donate 2000 dollars, and the US tax office will reduce the tax payments you need to make as if your income were 2000 USD lower. So you might get maybe 600 dollars of tax savings. You do a good deed and it costs you 1400 dollars instead of 2000.

Philipp
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gnasher729
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    That assumes you itemize your tax deductions. If you just take the standard deduction, there is no tax benefit for the donation. – Seth R Oct 11 '22 at 17:56
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    Well, that’s the best case. Interesting thing in the UK if you donate things of value to a charity, you can sign that the charity may claim your tax savings at 20%. You donate the camera, and they get 20% = 400, plus 20% of 400 = 80, plus 20% of 80 etc. – gnasher729 Oct 11 '22 at 21:04
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    Although I think you're also supposed to declare that $2000 as income if you sell it on eBay? I mean I'm sure most people don't but I think you're "supposed" to, at which point it would get taxed, which does narrow the gap somewhat, more or less depending on your bracket. – JamieB Oct 11 '22 at 21:45
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    @JamieB I'm not acquainted with US laws, but unless you declared buying the camera (at let's say $3000) as deductible expenses, why would you need to declare the earnings of a sale as income? Actually, you lost $1000 on buying the camera and selling it again on eBay later. If you used the camera commercially, you might need to declare income on the revenue generated from images shot with the camera, though. – Michael Karcher Oct 11 '22 at 22:27
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    @JamieB, only if OP sold it at a profit. Then the profit is income. Doubtful they are selling a used camera for more than they bought it for. – Seth R Oct 11 '22 at 22:51
  • @JamieB NO, that is wrong. Look up capital gains tax. – MonkeyZeus Oct 12 '22 at 14:55
  • This is the clearest, short answer. You give the item to the charity today, and you MIGHT get a FRACTION of the value back next April. – stannius Oct 12 '22 at 16:48
  • If this is difficult, please explain how, or go to Chat!

    It might be that both Tinker and Chris misunderstood the situation…

    Here in the UK if the vendor is a charity, the buyer can compel our Government to refund to the charity whatever tax the buyer paid on whatever income was used to buy the item…

    Something similar might apply in other jurisdictions but still, how would that match the wording of the Question?

    Outside that presumably obscure circumstance again, please say how what might be tax-deductible for the buyer could benefit the vendor?

     – Robbie Goodwin Oct 19 '22 at 19:46
11

is this an offer worth considering?

That depends, do you wish to receive $2,000 now or hope to potentially reduce your tax burden by $600 at the end of the year?

You're being asked to eat at least $1,400; the full $2,000 if you don't itemize your taxes.

Am I getting scammed?

Kind of. At minimum, they are trying to take advantage of you.

You're being negotiated with an offer which you don't fully understand. If you proceed with their suggestion then you have no recourse for monetary recovery since donating is a voluntary action.

If they turn around and sell your camera for $2,000 then they definitely played you like a fiddle.

I can only assume you're selling the camera because you want the money. If you were interested in donating it then you would have done so already.

I don't think that the aforementioned fact changes just because a, presumably legitimate, charity you've never heard of reaches out to you.

Imagine this scenario: you sell the camera and give them the $2,000. I strongly doubt that was ever your plan.

From a purely mathematical standpoint they would have to issue you documentation that the camera is worth $7,000 so that you can "save" $2,100 during tax season.

I'd say this is clearly fraud and possibly tax evasion. I'm doubtful you wish to go this route; and I can only assume that this non-profit is not stupid enough to agree to going this route.

MonkeyZeus
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  • It's definitely plausible that someone might suddenly decide to donate if they realize they can get ~1/3 of the donation back as a tax rebate. – user253751 Oct 12 '22 at 17:29
  • @user253751 A garbage bag full of clothes, sure. A $2,000 camera? I won't hold my breath... – MonkeyZeus Oct 12 '22 at 17:35
7

How do you tell if they're a bona-fide nonprofit?

Go to http://www.guidestar.org/ and look them up.

This can go faster if you ask for their EIN (Employer Identification Number), which is a "Social Security Number for businesses" (it comes from the same number pool, but unlike SSNs it's not a secret and is a very public number for a nonprofit. The format is changed: xx-yyyyyyy).

They should be able to bark out their EIN almost immediately, since they work with it all the time. I regularly ask fundraisers for it, because if they balk, that tells me they are probably fake. Plug that EIN into Guidestar and see what comes up, if anything.

There are for-profit private fundraising companies who collect donations on behalf of charities, but actually deduct their business expenses from what goes to the charity. As a result charities get as little as 9 cents on the dollar.

Can you take a tax deduction for this?

Probably not. You must be already taking enough tax deductions (mortgage interest, healthcare, a few other things) that you exceed the Standard Deduction. And since certain tax reforms raised the Standard Deduction from ~$5000 to ~$12,000 while eliminating the ~$5000 personal exemption, that dramatically reduced how many people itemize. For a short time, everyone could deduct about $300 a year. Unless Congress reinstates this, you can't anymore.

As a nonprofit manager, I have stopped claiming gifts are tax deductible. Because like 90% of our donors who could before, can't now. It's a gut-punch to charities, but on the upside all those people have simpler taxes.

Tax deduction means that you take the deducted amount and remove it from your adjusted gross income. So if your deduction is $2000, you pay the same tax as if you had earned $2000 less income that year.

When donating things not directly fungible to cash, you must use the actual fair market value - i.e. the real value you could actually sell the item for on eBay or Craigslist. In fact, "eBay completed auctions" which did sell are a good proof of value if you are audited. Audits happen 2-3 years later, and eBay etc. will have purged that data by the time you are audited, so collect that data now. "Save to PDF" is probably good enough.

Is it better to sell and then donate cash?

Maybe... but NOT on things which have appreciated (increased in value) especially securities (stocks) - in that case donate the item to the charity. If you held it longer than 1 year, your tax deduction is based on the appreciated (present) value. But here's the gotcha. If you sell it, you must pay capital gains on the gains at a typically 10-15% rate. If you donate it, the charity pays capital gains at their 0% rate. That is better for everyone.

There are charities called Donor Advised Funds who specialize in accepting donations of non-cash assets, converting them into cash, and re-donating the proceeds to other charities at a time of your choosing. Fidelity Charitable probably has the lowest cost of entry for securities, and then it becomes a lifetime relationship. Their initial donation must be $5000 of value. After that, any amount suffices. They don't charge anything else, except for 0.6% a year (less than 1%) for money you keep in the fund.

It's worth selling the item then donating if the item has lost value, and/or if you would be much better at selling it than a charity would. Honestly, charities are short staffed, and if someone gives one a box of Magic: The Gathering cards, they're gonna be "I don't know what to do with this" and may just toss it. A lot of donated items get ... not well used.

Another option (especially if it has appreciated) is to donate it to the charity, get this documented, and then volunteer your labor to help them sell it efficiently.

Harper - Reinstate Monica
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    I would expect an arts non-profit is actually interested to use the camera, not in its monetary value. – gerrit Oct 12 '22 at 13:51
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    The $300 deduction for charitable donations is no longer available. Now you can only take deductions for donations if you itemize. – Seth R Oct 12 '22 at 14:09
  • @SethR that was new in 2021. Are you sure they deleted it in 2022? The link I posted and links from there incl. the web version of Pub. 526 say nothing about its repeal. IRS talks as if it's current law, SMH... seems like bait and switch! – Harper - Reinstate Monica Oct 12 '22 at 19:19
  • "No, no, no" is a bit strong without some indication from the OP that the item has in fact appreciated since they acquired it. – stannius Oct 12 '22 at 22:34
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    @stannius ok, edited. – Harper - Reinstate Monica Oct 13 '22 at 00:26
  • @Harper-ReinstateMonica, it was a one-time thing for the 2020 tax year. It was not extended. Note that the link you posted says it is only good for contributions made before Dec 31, 2020. – Seth R Oct 13 '22 at 13:54
  • @SethR true but the year's not over, so 2022 tax law is still being written and it could still happen. Nonetheless I'm removing the claim from my answer. Edited. – Harper - Reinstate Monica Oct 13 '22 at 22:26
  • @SethR+ nonitemized $300/600 was extended to 2021 but as I previously noted was only cash not property. No action has occurred so far about 2022, but as noted 2022 isn't over yet. Harper: the current pub526, both web and download (pdf), like most other pubs, is for 2021; most of them won't be updated for 2022 until Dec-Feb, and I have seen (and noted) updates as late as April or May. – dave_thompson_085 Oct 14 '22 at 03:31
6

One of the other answers did the math for you. Assuming that you will have enough deductions that you will itemize:

Federal_Tax_savings= Marginal_federal_tax_rate * documented_value of the item.

There might also be a state/local income tax component to your tax savings.

If your goal was to take the cash from the sale and donate the cash to a charity this would mathematically give you the same result.

If the goal was to use the funds for something else you would end up with less cash, and would only see the impact when you file your taxes in the spring of 2023.

Person: That you can write it off at the end of the year and get the money back with taxes.

If you don't have enough deductions to itemize, that means you will be taking the standard deduction, and the tax savings will be zero. If this donating barely put you over the threshold to make itemizing worthwhile, then you will only see a partial savings.

You would also help an Amazing photography non profit.

A non-profit doesn't mean they are a charity. A charity in the US means that people donating money and stuff can deduct it from their taxes. If they aren't a charity there is no deduction possible.

Make sure it is a charity. They should identify that they are on their website. But then do more research. They have to register with the government as a charity. There are programs that aggregates donations for charities: United Way is but one example. They will probably be listed at one of these organizations.

You can also do a search on GuideStar: https://www.guidestar.org/search

If you are thinking of doing this, there are several things to consider:

  • You have to get the camera to that charity. Don't mail it to the person that contacted you, it needs to go to charity. The best way is for you to drop it off, but some charities will pick it up. Go to the charities website and search for the method they use regarding donations.

  • You need a documented receipt. The taxing authority may want to see it if they audit you. As you can see mailing it to the person who contacted you might mean that you never get a receipt.

mhoran_psprep
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  • I'm surprised that neither you nor @Harper - Reinstate Monica mentioned the IRS tool for searching for charities. The IRS knows about all of them, other aggregators may or may not, and would get their data by scraping the IRS public records to begin with. – littleadv Oct 19 '22 at 00:40
2

If the charity that contacted you turns out to be the one charity in all the world to which you most want to donate $2000, that will be really quite a remarkable coincidence.

WillO
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    I don't really see what this has to do with the question, nor is it reasonable to expect anyone to exclusively donate to a single "most worthy" charity. If I put $1 in whatever "for charity" box at the corner store, it doesn't suggest that I deem it to be the single most deserving charity in the world. Making a donation that takes little effort can still be rational even though one could possibly spend more effort to donate to a "better" cause. – Nuclear Hoagie Oct 13 '22 at 19:25
0

If they actually wrote/said

get the money back with taxes

implying that you would get back the full amount, then yes, it's a scam.

As explained by others, you do not get the full amount deducted from your taxes. You deduct the amount from your taxable income, so what you get back is the taxes you would have paid on that amount, which is only a small portion (at best a bit over one third).

If they are clear on that, then it's not a scam, and it's up to you to decide whether you want to do that, and then there are the issues of:

  • how much exactly you would get back (depends on your tax situation)
  • the additional work/cost to process that
  • the delay in getting the money "back" (really, paying less taxes)
  • whether the person you contacted you is actually representing a charity which is correctly registered and able to provide the relevant receipt

If they are not clear on that and try to make you think you will get all the money back, then it's clearly a scam.

jcaron
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-5

Any donation might be tax deductible to the buyer, depending on said buyer's circumstances which can't be relevant here.

How could anything you received - as seller or otherwise - be tax-deductible for you?

Robbie Goodwin
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  • There is no buyer and no seller here. It would be a donation to a non-profit. – Simon B Oct 17 '22 at 17:56
  • How could you ever reconcile your idea that "There is no buyer and no seller here" with the clear statement in the OQ, "Someone offered (anything) for something I am selling…" How does your "There is no seller here" relate to the OQ's "… I am selling…"? Am I missing something, or are you? – Robbie Goodwin Oct 17 '22 at 18:18
  • "Would you consider a fully tax deductible Donation to a San Francisco arts non-profit?"" - the Person is suggesting a donation. – Simon B Oct 17 '22 at 18:29
  • @SimonB How is that helpful? What you pay out will sometimes be deductible. What you take in, from any source, is what the deductions might be set against. If you truly see no difference between income and outgoings, how do you explain that? – Robbie Goodwin Oct 17 '22 at 18:34
  • Whoever helpfully down-voted me, why not say why?

    How could you doubt what I Posted unless you believe income and expense are the same thing?

     – Robbie Goodwin Oct 18 '22 at 19:24
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    I don't even understand how your answer relates to the question. What has income and expense, or buying or selling got to do with it? – Simon B Oct 18 '22 at 22:25
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    The question was: "I put something for sale. A charity contacted me asking if I'd be willing to donate that something to them. Is it a scam?". How's your answer related to that question? – littleadv Oct 19 '22 at 00:36