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[IP] Tax Lesson for donations

>The deduction would be quite independent of one's financial situation. It 
>would depend entirely on the pumps value. But determining its value is 
>where you might have to be creative. Until Kelly's starts including pumps 
>along with their old cars in their blue book, you could get a user to say 
>what it would have cost them on the open market.

But there may be no "actual" deduction depending on your financial 
situation.  Let me give you a situation.  A married couple filing joint has 
a standard deduction of $7850.  They own no house, they pay rent.  So, 
there's no mortgage interest or property tax (which are the largest 
deductions people generally claim when they file schedule A).  Their income 
is not very high so they don't have large withholding for their state.  If 
they claim fair market value for the pump (I'll say $3,000, to just use a 
number for this scenario) and when they add their deductions together they 
come up with $7750.  So, they'll take the standard deduction of $7850 which 
is larger than the total of their "actual" deductions.  Which, in effect, 
means they really didn't get a deduction for donating the pump since they 
would have gotten the standard deduction anyway.  My point is, while the 
fair market value (which is always debatable, some pumps sell on Ebay for 
very little) has nothing to do with your financial situation, the "actual" 
amount of the deduction you get does.  If the preceding couple ended up 
with a total of $8000 for their "itemized deductions" they actually would 
only be getting $150 more in deductions for that pump.  Which if they are 
in a 15% tax bracket means they would get $22.50 more in refund, 20% tax 
bracket they would get $30.00 more in refund.  While I realize these are 
simplified scenarios, we see a lot of this type of thing.  As tax 
preparers, it's so hard explaining to people why they did not get a large 
refund because they made donations somewhere.  "Well they told me I could 
deduct this from my taxes."  That's why I ALWAYS recommend talking to your 
financial consultant or tax preparer first to determine whether it is in 
your best interest to donate that pump or keep it as a backup, every 
situation is different.  Taxes are definitely a YMMV situation.  Lesson over.

tax preparer for 7 years
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