Minimizing Loss on Diamond Ring

[hotsawce]

Hey all,

I purchased a diamond ring for quite a bit of money. Not for myself or personal use, but long story short it no longer has use and it seems I must either donate or sell it for much less than I originally paid for it. I was wondering if anyone had any suggestions to make the best of a bad situation here.

Is there any way a capital loss could be claimed? 

Could it be donated for a charitable deduction?

Anything else worth considering?

Thank you in advance for your time and insight

[Mike9241]

I agree with the following thread that a diamond ring is not an investment. therefore, no capital loss could be claimed. If you tried to take a capital loss it would stand out on form 8949.

https://www.dmia.net/diamond-rings-investment/#:~:text=The%20general%20consensus%20is%20that%20diamo... 

you can contribute it to charity but your deduction would be limited to fair market value which would be the same as its selling price.  you would need to be able to itemize your deductions to get a tax benefit. if the FMV is more than $5,000 you need a formal appraisal which must be attached to your tax return. 

in short, I don't see you getting any tax benefit from the decline in value.

[GeorgeDenseff]

The markup on a diamond is very high.  You lose about half the value when you take it out of the jewelry store.  It is not an investment.  You best bet of recouping some of your money is to try to sell it online.  Someone might love it enough to pay you more than a local pawn shop or jewelry store.

As already stated, there is no tax benefit to donating it.

[Opus 17]

You certainly could donate it, but at best you would save 25% of the fair market value in taxes. Fair market value is what you could actually get selling it today, in used condition, on eBay or Craigslist or to a jeweler or pawn shop.  You might as well sell it and get 100% of the fair market value as cash to you.  Then, donate some or all of the cash to charity if that feels like the right thing to do.  

[hotsawce]

Interesting. out of curiosity, why would I only save 25% of the Fair Market Value in taxes? That’s definitely something to consider. If I received a FMV appraisal from an auction house like Sotheby’s, I was curious if the value might come in higher than what some other independent jewelers that scrap or resell themselves would offer. 

It seems resale is the best way to go. Thanks for your help. 

[VolvoGirl]

Deductions only reduce your income so you get taxed on a lower amount.   It's not a 1:1 savings on the tax.   You only save the amount of your tax bracket.   Like if you are in the 25% tax rate a $100 deduction only reduces the tax by $25.

And also all your deductions have to be more than the Standard Deduction to be used.  So then only the amount that puts you over the Standard Deduction makes a difference.

For 2020 the standard deduction amounts are:

Single 12,400 + 1,650 for 65 and over or blind (14,050)

HOH 18,650 + 1,650 for 65 and over or blind

Joint 24,800 + 1,300 for each 65 and over or blind

Married filing Separate 12,400 + 1,300 for 65 and over or blind

[VolvoGirl]

I just wrote up an example for 2020 for Single.  Say your income is 50,000

Tax on 50,000 is 6,796

But you get a 12,400 Standard Deduction for Single

50,000-12,400 = 37,600 taxable income

Tax on 37,600 is 4,318 saving you 2,478 in taxes or just 20% of the 12,400 Deduction