Trent at The Simple Dollar has a great post about how charitable donations affect your income tax return, but he only covers cash donations.
The gist of his post is: you reduce your tax bill roughly a quarter for every dollar you donate (Adjust this up or down depending on your tax bracket).
One thing we do often in my house is donate goods to Goodwill (which are considered “in-kind donations”). We started the habit when our family of 5 lived lived in a 900 square foot cottage and we had to mercilessly cut down on our physical possessions. Most non-consumable things that came into our lives were either donated, or offset by donating something else.
Now we have more room to spare but old habits die hard (and this is a habit we let live anyway). At one point, we tried a garage sale, but it was very hard work and when I thought about it, the numbers don’t even add up, when you take into account the value of your time.
If I can get 25 cents on the dollar just for giving things away, why should I bust my chops to sell it at maybe 75 cents on the dollar, if I’m lucky?
Take for example this awesome baby food mill we recently donated. It was probably worth $60. I would have put it on craigslist for $45. Oh, gotta get out the camera and take some pictures of it. Then use craigslist, my favorite 1998-looking website. Then field emails from mostly spammers, a few well-intentioned but flaky people. Oops, my ad expired, time to repost it. Now I have a buyer, but they want to meet me halfway, which means a car-ride to the QFC parking lot, or whatever.
You get the idea. I eventually make $40 (the buyer knows how to bargain) minus the cost of driving, but I probably spent 4 hours of my time to make the sale. That’s under $10 an hour. No thanks.
On the other hand, I put it in the Goodwill bag, and bam there’s $15 off my taxes and the good feeling that someone else is going to be able to refurbish it and put food on their table (because refurbishing it is their job, not because it’s a baby food mill). Some charities even pick up your donations, but we go to Goodwill frequently enough that it’s not worth the trouble of scheduling a pick-up from another charity.
We even donated our old car, when we decided to become a 1-car family. Big or little, it doesn’t matter. Now it’s gotten to the point where when we get something new, Venessa and I usually just look at each other and say “Goodwill box.” Of course this doesn’t apply to hand-made gifts, stuff that’s given from the heart, or items intrinsically valuable to us.
Donating so much of our stuff helps us live simply, it feels good, and it frees up more time to do the things we love. Then when tax time rolls around each year, we get a little boost in our pocketbooks. Imagine how awesome thrift shopping would be if everyone did this?