, Answering FAQ'sTurboTax Employee
When you donate an item to charity, the IRS lets you to deduct the fair market value of the item at the time of the donation.
The IRS defines fair market value as the sale price between a willing buyer and seller, where neither is required to buy or sell and both have relevant knowledge of the facts.
One method the IRS recommends for determining fair market value is to check the price of similar-selling items from a variety of sources.
To determine fair market values, we gather pricing information from auction websites like eBay as well as resale outlets and thrift stores across the U.S.
Every day we collect information from hundreds of thousands of completed eBay auctions to capture valuations that are not commonly found in thrift, consignment, or specialty stores.
We then perform a statistical calculation to determine the fair market value of the item, which is then translated to a high, medium, or low value.
We also collect pricing information through manual processes, for example surveying thrift and consignment stores across the country.
This combination of electronic and manual price-collection allows us to create a comprehensive, up-to-date collection of values based on real-world transactions that comply with IRS guidelines.
Using valuations solely from organizations like Goodwill or Salvation Army is not an accurate assessment of fair market values. Goodwill or the Salvation Army guidelines represent bargain pricing stores and typically understate the true market value.
We do use prices from Goodwill and Salvation Army stores, but only to supplement information gathered from consignment and specialty stores as well as millions of eBay transactions. This approach is consistent with the IRS guidance to seek prices from a variety of sources.