Stop avoiding your messy closet. That pile of clothes you'll probably never wear again represents cold, hard cash.
How? You can donate unwanted items to charity and generate a tax deduction for yourself. (Of course, items donated now, in 2003, will represent savings on your 2003 tax return, not the 2002 return you're working on now. Still, it's worth doing now. Begin reducing your upcoming taxes, while making room in your closets and basement.)
Here's how it generally works (though as with all things tax-ish, there are always rules and limitations). Collect your castoff clothes (and computer equipment, clothes, toys, and furniture), and catalog everything on paper -- by type, condition, and quantity. Get a fair estimate of their values (and realize it may not be close to what you paid for them), and sum it all up. Let's say the total is $800. If you're in the 27% tax bracket and can deduct this amount, you'll save $216 -- not bad, eh? If you donate $2,000 of stuff (which might be surprisingly easy to do) and are in the 30% tax bracket, you'll save a whopping $600! Don't simply guess their current fair value, though. Guess too high, and you run the risk of ticking off Uncle Sam, should he come snooping. Guess too low, and you're leaving money on the table.
A little research can pay off. One useful resource, ItsDeductible.com, offers (for $30) to help you get the most for your stuff. Here's one article from its website, summarizing this topic. For more information, check out this selection of IRS documents, which covers various deductions. Also, as you prepare your 2002 tax return, check out our friendly Motley Fool Tax Guide 2002, which aims to help you make smart tax decisions throughout each year. You could save thousands of dollars with these tax tips. Finally, pop over to our Tax Strategies Center, where our diligent TMF Taxes has prepared many informative articles for you.
