Understanding cost basis for donated items

Summary: Cost basis is usually what you paid for an item. If you file Form 8283, the IRS asks for your cost or adjusted basis for items over $500, and it allows an explanation if you have reasonable cause for missing required details. This article covers cost basis for clothing, household items, and similar personal property, including why tax software may still ask for purchase price in interview mode.

Why cost basis matters

When your total non-cash donations exceed $500, the IRS requires you to report your cost or adjusted basis on Form 8283. Cost basis is generally what you paid, plus purchase-related costs like sales tax.

This helps the IRS understand your donation's history. While your deduction is based on fair market value (FMV) at donation time, Form 8283 asks for cost basis to provide context about the property's original value.

Even when cost basis is not entered on a final tax form, you should still keep your basis records and estimation notes with your tax files. Charity Record can help you do this with our Additional notes field on item donations.

How to determine your cost basis

If you have records

Use the actual purchase price from your receipts, bank statements, or credit card records. This is the most straightforward approach. Your cost typically includes things like sales tax or other costs tied to the purchase.

If you don't remember the exact amount

Most people don't keep receipts for clothing and household items. This is normal. Enter your best good-faith estimate based on what similar items typically cost when new.

What counts as a reasonable estimate:

For clothing: Think about what you typically pay for similar items new
For furniture: Recall what the piece cost when purchased
For electronics: Consider the original retail price
For household items: Estimate based on current retail prices for comparable items

Example: You're donating a winter coat you bought a few years ago. You don't have the receipt, but similar coats typically sell new for around $120. Use $120 as your cost basis.

If you only know the FMV

⚠️ Use with caution: The following is a third-party guideline, not IRS guidance. The IRS does not endorse any specific multiplier for estimating cost basis.

If you have no sense of original cost, some charities publish rough guidelines for estimating FMV. For example, Goodwill Northern New England's donation value guide suggests using 30% of the item's original price to estimate FMV for items not listed.

Working backwards from a charity's FMV guideline can give you a rough starting point for thinking about original cost, but it is not IRS guidance and may not reflect your actual cost basis. The IRS also notes that formulas like a percentage of replacement cost aren't acceptable for valuing used clothing or household items, so treat any formula as a last resort.

Example: If an item's FMV is $100, a 30%-of-original guideline would imply an original price around $330 (about 3.3x the FMV). This is only a heuristic, not a rule.

Important considerations:

This is a charity's internal guideline for estimating FMV, not IRS guidance for estimating cost basis
The IRS notes that replacement cost and other rules of thumb may not reflect fair market value in many cases, so treat any formula as a last resort
Use this approach only when you cannot estimate original cost any other way
If you rely on an estimation method, keep notes explaining your reasoning

Cost basis vs. fair market value

These are different numbers that serve different purposes:

Term	What it means	Used for
Cost basis	What you originally paid	Form 8283 reporting
Fair market value (FMV)	What it's worth now at donation	Your actual deduction

Your deduction is based on FMV, not cost basis. Form 8283 asks for both numbers (for items over $500) to help establish the donation's legitimacy.

Example: - You paid $200 for a leather jacket (cost basis) - It's now worth $50 at a thrift store (FMV) - Your deduction is $50 (the FMV) - Form 8283 asks you to report both numbers

When cost basis is required

For typical clothing, furniture, and household item donations, the IRS Form 8283 instructions generally work like this:

If your total non-cash contributions exceed $500 for the year, Form 8283 is generally required
If your donations are in Section A, you generally report cost or adjusted basis there
If similar items total over $5,000, Section B and a qualified appraisal are generally required, and basis is still part of the reporting picture

For donations under $500 total, you generally do not file Form 8283.

Note: Your tax software may ask for purchase price (cost basis) even in cases where the IRS may not strictly require Form 8283 on your final return. This is normal. Prompts vary by product and version, but many interview flows collect potentially relevant Form 8283 worksheet fields up front and then determine what is required after the rest of your return is completed.

Keep this in your records even when you don't enter it

Even when you are not entering every field on a form, keep documentation for:

Your cost basis (actual purchase price or your good-faith estimate method)
FMV support (how you determined value, plus comparable references if used)
Date acquired and how acquired (purchase, gift, inheritance, etc.)
Item condition and description (especially for clothing/household goods)
Donation acknowledgments and receipts (including contemporaneous written acknowledgment for donations of $250 or more)

You may not type all of this into interview screens, but keeping it is still part of good tax records. Charity Record can help you with logging some of this information, but the tool does not store all supporting documentation such as receipts or appraisals.

Special situations

According to IRS Publication 551, cost basis rules vary depending on how you acquired the property:

Gifted items

If someone gave you the item, gift basis rules apply. You generally need the donor's adjusted basis and the FMV at the time of the gift, which can affect your basis. If you don't know what they paid, use your best estimate of what the item cost when new and keep notes about your estimate.

Inherited items

For inherited property, basis is generally the FMV at the date of death (or an alternate valuation date if the estate uses one), with exceptions for certain situations.

Grouped items (the typical case)

Most people donate multiple items at once: a bag of clothes, kitchen items, electronics, and so on. For Form 8283, the IRS generally allows you to group similar items together by category rather than listing each one separately.

How grouping works:

Items are typically grouped by category (e.g., "Clothing", "Kitchen", "Electronics")
You report a single combined FMV and a single combined cost basis for each category
The date acquired can be "Various" if you held all items for at least 12 months

Estimating aggregate cost basis:

When you have 15 shirts, 3 jackets, and 10 pairs of pants grouped as "Clothing", you don't need to list the cost basis for each item. Instead, estimate the total you originally paid for all items in that category.

Example: You're donating clothing with a combined FMV of $150. You estimate you originally paid around $600 total for these items over the years (some discount store purchases, some department store). Your aggregate cost basis is $600.

In Charity Record: When you export, items are grouped by category. If your tax software asks for cost basis on a grouped category, add up what you estimate you paid for all items in that group. You may have used the Notes field on item donations to add purchase price info.

Items you created

If you made the item yourself, your cost basis is typically the cost of materials, not the value of your time.

Quick reference

Situation	How to determine cost basis
Have receipt	Use actual purchase price
No receipt, remember roughly	Use your best estimate
Grouped items (typical)	Sum your estimates for all items in the category
No idea, only know FMV	See third-party guidelines (use with caution, not IRS endorsed)
Gift	Special basis rules apply (use best estimate if needed)
Inheritance	Special basis rules apply
Self-made	Use cost of materials

Need more help?

IRS Resources: - IRS Form 8283 Instructions – Noncash Charitable Contributions - IRS Publication 551 – Basis of Assets - IRS Publication 561 – Determining the Value of Donated Property

Charity Record is a donation tracking tool, not a tax advisor. This article summarizes publicly available IRS guidance to help you use our software. Estimation methods from third parties (such as charity valuation guides) are provided for reference only and are not IRS guidance. You are responsible for ensuring your tax filings comply with IRS requirements. For complex situations involving large donations, unusual assets, or valuation questions, consult a tax professional for advice specific to your situation.

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