Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Donating Depreciated Assets

Posted by taxguru on January 2, 2004

I recently received the following question illustrating why it is important to be careful on whom you rely for tax advice:

The detail man for the medical supply house says I can donate old, depreciated equipment and write off up to $5,000. He explained it as much like you told me about donating used clothing up to $499 without a receipt. Is this true or do you know anything about it?

My response:

Either that guy doesn’t know what he was talking about or you misinterpreted what you were told.

I am very well experienced with this issue.

For depreciated assets that are donated, your charitable donation is limited to the lower of its current market value or its net cost basis on your books (cost less depreciation). If it’s fully depreciated, your deduction for donating it is zero.

Allowing you to deduct the cost twice, as depreciation and as a charitable donation, is a perfect example of something that is too good to be true. Is this person perhaps trying to encourage you to get rid of your current equipment and buy new replacements from him?

The $5,000 limit has nothing to do with no receipt required. A receipt is required for any single donation of $250 or more. A formal appraisal is required for assets valued at more than $5,000. Total non-cash donations of $500 or less for the year don’t require any details to be included with the tax return.

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