According to the cliche, beauty is in the eye of the beholder. You may think your collection of antique cars is worth millions. Your spouse may think it's worthless. Yet, if you plan to donate your collection to a charitable organization and want to claim a charitable contribution deduction, you will need an objective and professional opinion. A certified appraisal is essential.
If your charitable gift is worth more than $5,000, you must obtain a certified appraisal in order to claim a tax deduction for the gift. What is a certified appraisal? Who is qualified to appraise? What does an appraisal cost? And is the cost of the appraisal tax deductible? Let's try to answer each of these questions individually.
The Internal Revenue Service expects your appraisal to meet certain conditions. The appraisal must be made within 60 days before the gift is officially donated, it must include a summary of the appraiser's qualifications, and it must be signed and dated by the appraiser with an estimate of the gift's value and the appraiser's definition of value. Obviously, your choice of appraiser will determine the quality of your appraisal. Make sure you find a good one.
Your choice of appraiser will depend somewhat on the type of gift you're donating. If you're giving real estate, a local appraiser familiar with the area will be sufficient. But if you're giving a rare painting, you may have to search for an appraiser who has a better appreciation for the national or world market. Keep in mind, too, that you might want different appraisers for different items in a collection. An expert on old European art may not necessarily be as well informed on modern American art.
When looking for an appraiser, you should be aware of the following qualifications. First, an appraiser must publicly declare him- or herself an appraiser. (Locally, most appraisers will be listed in the Yellow Pages of your telephone book, but if you need an outside appraiser, you may want to contact the American Society of Appraisers in New York City for assistance.) Second, an appraiser must be qualified. If your appraiser is not qualified, your deduction will not be allowed even if the appraisal is accurate. And, third, an appraiser should be objective and independent of the gift transaction.
The cost of an appraisal will vary depending on the item being evaluated and the tests required to verify the item's authenticity. If the receiver of the gift plans to sell the item at some point, some auction houses offer an appraisal rebate if they are subsequently employed to sell the item. One general restriction on an appraisal fee is that it cannot be a percentage of the item's estimated value.
The cost of the appraisal is tax deductible. It should not be included, however, as part of the charitable deduction. Rather, it should be listed as part of your miscellaneous itemized deduction, subject to the limitations on such deduction.
One final requirement for the IRS is Form 8283. This is the appraisal summary, which has to be signed by both the appraiser and by an official representing the receiving organization. This form must be attached to your tax return. Without the form and the appropriate signatures, your deductions will not be allowed.
Appraisers are used in many new fields today. In addition to the established areas of jewelry, antiques, art, coins, and stamps, a demand exists now for new collectibles like records, autographs, toys, baseball cards, and comic books. With this demand come higher prices and a greater need for accurate appraisals. And in regard to your antique cars? Beauty is still in the eye of the beholder. But value is now in the eye of the appraiser.