How do I record an in-kind donation for tax purposes?

Mark G

I donated goods to a charity worth enough to want to claim on my taxes. How do I record this?

Greg_the_Geek

Use the category Gifts & Donations:Charity. It goes to the correct tax line item on Schedule A.

Tom Young

If you happen to have these "goods" recorded on your balance sheet in some sort of Asset Account - "Furniture & Fixtures", say - then the accounting entry would be along the lines of

Debit (increase) Charitable Donations Category   $XXX

Credit (decrease) Furniture & Fixtures Account    $XXX

Of course you can only claim the lesser of cost or fair market value for in-kind donations and assuming the fair market value of the items is less than the cost recorded in your Account, the full and complete entry would be more along the lines of

Debit (increase) Charitable Donations Category               $XXX

Debit (increase) Loss on Charitable Donations Category $YYY  

Credit (decrease) Furniture & Fixtures Account                $ZZZ

where $ZZZ (original cost) - $YYY (loss) = $XXX (FMV of donation)

If the goods you donated were expensed when you purchased them then the accounting entry would be along the lines of

Debit (increase) Charitable Donations Category                          $XXX

Credit (decrease) Various Expense Categories previously used  $XXX

or, easier

Debit (increase) Charitable Donations Category  $XXX

Credit (decrease) Miscellaneous Expenses         $XXX

As with the first example above you could make this even more difficult, recording the difference between the original expenses and the current "fair market value" expense as some sort of "loss".

I, personally, have tended to expense most purchases of "goods", like pieces of furniture, tools, etc. and when I donate them I make NO Quicken entry, recognizing that sometimes the effort to get things "perfectly correct" from an accounting standpoint simply isn't worth the effort.  I make a list on a piece of paper of the donated items and my estimate of FMV and simply use that when I prepare my income tax return.

Tom Young

The very easiest way to do this is to create an offsetting Category to your charitable contributions entry and simply omit that offsetting Category from the tax report to the accountant.

Jim_Harman

Adding one more approach, which works well enough for me:

I have an Asset account in Quicken called "Household goods." I set the opening balance equal to a rough estimate of the value of the stuff I own. This account is included by default in my net worth.

When I give an item to charity, I record the payee and a decrease in this account equal to the fair market value of the item. I use an expense category that is set to the tax line item of "Schedule A: Non-cash charity contributions". The value of these donations is included in Quicken's tax reports.

Greg_the_Geek

Use the category Gifts & Donations:Charity. It goes to the correct tax line item on Schedule A.

Tom Young

If you happen to have these "goods" recorded on your balance sheet in some sort of Asset Account - "Furniture & Fixtures", say - then the accounting entry would be along the lines of

Debit (increase) Charitable Donations Category   $XXX

Credit (decrease) Furniture & Fixtures Account    $XXX

Of course you can only claim the lesser of cost or fair market value for in-kind donations and assuming the fair market value of the items is less than the cost recorded in your Account, the full and complete entry would be more along the lines of

Debit (increase) Charitable Donations Category               $XXX

Debit (increase) Loss on Charitable Donations Category $YYY  

Credit (decrease) Furniture & Fixtures Account                $ZZZ

where $ZZZ (original cost) - $YYY (loss) = $XXX (FMV of donation)

If the goods you donated were expensed when you purchased them then the accounting entry would be along the lines of

Debit (increase) Charitable Donations Category                          $XXX

Credit (decrease) Various Expense Categories previously used  $XXX

or, easier

Debit (increase) Charitable Donations Category  $XXX

Credit (decrease) Miscellaneous Expenses         $XXX

As with the first example above you could make this even more difficult, recording the difference between the original expenses and the current "fair market value" expense as some sort of "loss".

I, personally, have tended to expense most purchases of "goods", like pieces of furniture, tools, etc. and when I donate them I make NO Quicken entry, recognizing that sometimes the effort to get things "perfectly correct" from an accounting standpoint simply isn't worth the effort.  I make a list on a piece of paper of the donated items and my estimate of FMV and simply use that when I prepare my income tax return.

Mark G

Thanks for these very thorough answers but looking for something maybe a bit simpler. Let's say the donations are household furniture and computer equipment. The computer equipment was expensed but that was years ago. The furniture is family stuff so that never hit my books. Neither was captured in an asset account. I could, as Tom suggests, simply record it on a piece of paper but I'd like to have this in my tax summary, which I pass along to my tax preparer at the end of the year. I guess I"m really asking what account I capture these transactions in. Would I need to set up a dummy asset account that would now have a negative balance? Should I add the items to this "Charity asset" account at the FMV and then record the contribution of them at the same value?

Tom Young

The very easiest way to do this is to create an offsetting Category to your charitable contributions entry and simply omit that offsetting Category from the tax report to the accountant.

Mark G

Thanks.

Jim_Harman

Adding one more approach, which works well enough for me:

I have an Asset account in Quicken called "Household goods." I set the opening balance equal to a rough estimate of the value of the stuff I own. This account is included by default in my net worth.

When I give an item to charity, I record the payee and a decrease in this account equal to the fair market value of the item. I use an expense category that is set to the tax line item of "Schedule A: Non-cash charity contributions". The value of these donations is included in Quicken's tax reports.