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The Honolulu Advertiser

Posted on: Thursday, May 26, 2005

Encyclopedias tough to give away, but check with libraries just in case

By Deborah Adamson
Advertiser Staff Writer

Q: I know that donations can be a tax deduction but a few people have told me that encyclopedias are worthless. Rather than trying to find someone to donate the books to, would it be better to just throw them in a recycle bin? — Mike Yoshida, McCully

A: It's not unusual for donors of noncash items like yourself to be unsure of the value of what you plan to give to charity. Moreover, charities might have limits on what they'll take.

Encyclopedias, especially older volumes, can be tough to give away because charities may not be able to resell them since the information is outdated. Goodwill doesn't take them anymore. Public schools and libraries do, but generally encyclopedias cannot be older than five years and they must have the space for them, according to Friends of the Library of Hawaii and the state Department of Education.

However, each library or school sets its own rules, so call around. For instance, the McCully-Mo'ili'ili library will accept them. You also can try nursing homes, assisted-living facilities and senior centers. The Plaza at the Punchbowl facility said its library is full, but it normally would take such donations.

For other types of goods, the rule is you can deduct their fair market value from state and federal taxes, according to the Hawai'i Department of Taxation and the Internal Revenue Service. Fair market value is what a buyer would be willing to pay you for your goods.

But many taxpayers who itemize on their returns don't use the fair market value, thus low-balling their deductions.

"People usually undervalue the goods that they're giving away," said Bill Titcomb, owner of Ohana Tax Service in Mililani who gives clients a worksheet listing different types of goods donated and a range of values.

In Honolulu, women's slacks in good condition can carry a value of $5 to $20 while a pair of shoes may be worth $5 to $15, according to Titcomb's worksheet. Drapes? $10 to $40. A sofa can be valued from $50 to $395.

To know how much an item is worth, check prices of similar used goods in your town, said IRS spokesman Bill Steiner. Try thrift and consignment shops.

TurboTax also sells a software program that helps you value your noncash donations, said Laura Kay Rand, vice president of corporate services at Goodwill Industries of Hawaii. The program, "ItsDeductible," costs $20.

If you donate goods valued at less than $500 in a year, just keep a receipt of the donation. If more than $500, keep a list of the items and be prepared to substantiate their worth. Consider taking a picture of the goods, Titcomb said.

If you donate an item worth more than $5,000, you would need an appraisal, Steiner said. Audits can be triggered if the donation seems out of line with income, he said, such as deducting $10,000 in donations when reported income is $20,000.

For more information on valuing charitable donations, go to www.irs.gov. In the "search for" box, type in Publication 526 or Publication 561.

Got a personal finance or consumer question? Contact Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.