Medical equip purchased

[pro88]

My spouse recently passed but a lot of specialized medical aides/equip remain & were dropped off at a "no attendant" donation drop site.

My questions to you:

-- The cost of all these was $1,612, (before sales tax, which is 7% in MD) and I worry it will stand out as a red flag to IRS.

-- No, I don't have any receipts. The receiving organization sent a receipt listing the items, stating to go online in order to establish the cost.

-- Do you think I should depreciate this total by 20% since it's no longer brand new?

-- Do you think I should include the 7% sales tax we spent?

THANK YOU SO MUCH FOR YOUR HELP.

[GeorgeDenseff]

 Donations between $501-5,000 require a record of how and when the items were acquired and their adjusted basis. When you determine the amount of the donation, you research what each item would sell for if someone were actually going to buy it from you.

You research by looking at online sales sites like eBay and also looking for classified ads of people selling the item or wanting to purchase it.

Keep a record of each item with date and price acquired.  Then keep records of the research they you did to determine the fair market value of each item.

 l.

[Opus 17 · Accepted solution]

ALL donations of items require the same documentation, not just items between $500 and $5000.  (If the item donation is more than $5000, there is additional documentation required, but that is added to the basic requirement, not a substitution.)

You must have a written record of when the item was acquired, how much you paid, it's condition when donated, and how you determined the fair market value at time of donation.  If you have to estimate or guess when making this record, that's better than nothing.  If you are audited, it will be up to the auditor how much weight to assign your proof.  If your proof is insufficient, they can deny the tax deduction.

There is no set depreciation percentage, especially for specialty or medical items.  Ebay is one good way to determine the value of used personal items but there may be other ways.  It also depends on the condition of the item.  I happen to own a $1000 travel CPAP machine that was used for about 10 nights, but is currently worthless since the model was recalled for manufacturing defects.  You will have to make a diligent effort to determine the value of your specific items.

You can include the sales tax in your cost basis—the amount you paid for the items.  However, for items that have lost value, your tax deduction is the present fair market value in current (used) condition, which has nothing to do with what you paid.

[rjs · Accepted solution]

If you look at eBay to determine fair market value, look only at completed sales, not asking prices, which are often inflated.