IRS Publication 561: Valuing Donated Property and Appraisal Rules

Under IRS Publication 561, the fair market value of donated property is the price a willing buyer and a willing seller would agree on in an open-market transaction, with neither under pressure and both reasonably informed about what’s changing hands. That single definition governs every noncash charitable deduction, but the way you arrive at the number, and the paperwork you need to back it up, changes with the type of property and its value. A used sweater, a share of Apple, a 2014 Honda, and a small-business interest all follow different rules under the same publication.

Three details in the definition matter. Both parties are hypothetical volunteers, so a forced sale price is not FMV. Both are treated as reasonably informed, so a hidden defect that lowers real value counts even if nobody noticed it. And value is measured in the market where the property is most commonly sold to the public, which for a donated antique ring means the retail jewelry store, not the wholesale dealer’s counter. Condition, usefulness, and any restriction on the property, an easement, a lien, a resale covenant, all pull FMV down, and the burden of proving your number is yours.

The Valuation Date

FMV is a snapshot. For a charitable contribution, the valuation date is the day you transferred the property to the charity or the day title changed hands, provided you kept no rights that would limit the charity’s use of it.¹ Only conditions that existed on that date matter. A market drop the following week, damage a month later, a spike in comparable sales the next quarter, none of it changes the number you report.

Household Goods and Clothing

Used furniture, appliances, electronics, linens, and clothing are almost always worth far less than you paid. Publication 561 tells you to value them at what a buyer would actually pay in a thrift shop or consignment store, not what a replacement would cost new.² A five-year-old couch that cost $1,200 new might be worth $150 secondhand, and $150 is the FMV.

You cannot deduct clothing or household items at all unless they are in good used condition or better. The single exception is one item for which you claim more than $500 and attach a qualified appraisal.³ Note that “household items” does not include paintings, antiques, other objects of art, jewelry, gems, or collections like stamps and coins. Those follow the rules further down.

Publicly Traded Stocks and Bonds

Publicly traded securities are the easiest to value. FMV is the average of the highest and lowest selling prices on the valuation date. Stock with a $50 high and a $46 low that day has an FMV of $48 per share. If no trades happened on the valuation date, the regulations use a weighted average of the mean prices from the nearest trading days before and after, and thinly traded or over-the-counter securities have their own mechanics.⁴

Vehicles, Boats, and Airplanes

A donated car, boat, or airplane comes with a rule that limits your deduction based on what the charity does with it. If the charity sells the vehicle, your deduction is generally capped at the gross sale proceeds, no matter what a pricing guide says the vehicle was worth.⁵ A car you valued at $5,000 that the charity auctions for $2,100 gives you a $2,100 deduction.

Full FMV is available only if the charity certifies in writing that it will make significant use of the vehicle, make material improvements to it, or give or sell it at well below market value to someone in need as part of its charitable mission. When the charity sells the vehicle for $500 or less, you can deduct the lesser of FMV or $500.⁵

The charity must send you Form 1098-C within 30 days of the sale (or within 30 days of the contribution if the vehicle wasn’t sold). For any vehicle with a claimed value over $500, attach Copy B of Form 1098-C to your return. Skip that step and the IRS disallows the deduction outright.⁶

Jewelry, Art, and Collectibles

Jewelry and gemstones need an expert opinion whenever the value is more than nominal. FMV is the retail price a willing buyer would pay for the piece in its current condition, not the insurance replacement figure and not what you paid for it. A qualified appraisal is required whenever you claim more than $5,000 for jewelry, art, or similar items.²

Fine art valued at $20,000 or more requires the qualified appraisal to be attached to Form 8283. If you donate art appraised at $50,000 or more, you can ask the IRS for a Statement of Value before filing. The request needs the qualified appraisal, a completed Section B of Form 8283, and a user fee of $8,400 for one to three items (plus $800 for each additional item), paid through Pay.gov.² The Statement of Value is not binding on the IRS, but it gives you a strong starting point if the return is examined.

Stamps, coins, sports memorabilia, and other collectibles are valued from comparable sales, with adjustments for condition, provenance, and whether the comparable sale was truly at arm’s length.

Cryptocurrency and Other Digital Assets

The IRS treats virtual currency as property, not currency.⁷ The same valuation and substantiation rules that apply to other noncash property apply to donated digital assets. Donate crypto worth more than $5,000 and the contribution goes in Section B of Form 8283, the section reserved for property that requires a qualified appraisal.⁸ Because prices move by the minute, document the exchange rate and time of transfer carefully.

Real Estate and Closely Held Business Interests

Real property almost always requires a professional appraisal because no two parcels are identical. Publication 561 recognizes three standard approaches: comparable sales, income capitalization for rental and income-producing property, and replacement cost less depreciation for special-purpose buildings. A competent appraiser considers all three and explains which one best reflects the property’s actual market value. Partial interests, such as a remainder interest or a conservation easement, get substantially more complex, and the IRS scrutinizes those deductions closely.

Shares in a business not traded on a public exchange also require a full appraisal, one based on the factors in Revenue Ruling 59-60: the nature and history of the business, industry outlook, financial statements, earning capacity, dividend history, goodwill, prior sales of the stock, and market prices of comparable public companies. Discounts for lack of marketability or a minority interest can reduce FMV significantly, but only if the appraiser supports them with market evidence. Aggressive discounts are one of the most common triggers for IRS challenges.

When FMV Is Not Your Actual Deduction

Getting FMV right doesn’t always mean you can deduct it. Two rules cut the deduction below FMV.

First, if the property would have produced short-term capital gain or ordinary income had you sold it, the deduction drops to your cost basis.⁹ In practice, you need to have held appreciated property for more than a year to deduct its full FMV.

Second, for tangible personal property like artwork, furniture, or equipment, if the charity’s use of the item is unrelated to its tax-exempt purpose, the deduction is reduced by the long-term capital gain that would have resulted from a sale.⁹ A painting donated to a museum that will display it supports a full FMV deduction. The same painting donated to a hospital that will sell it at a fundraiser does not. Confirm the intended use with the charity before you finalize the donation.

Substantiation by Dollar Threshold

The paperwork requirements are tiered, and the IRS enforces them strictly. Miss a step and the whole deduction can be thrown out, not just reduced.

For any noncash contribution of $250 or more, get a contemporaneous written acknowledgment from the charity describing the property and stating whether the organization gave you any goods or services in return. You need it by the time you file.¹⁰

Form 8283 is required whenever your total noncash contributions exceed $500.¹¹ Section A covers donations valued between $501 and $5,000 and asks for a description, the date and manner of acquisition, your cost basis, and the claimed FMV. Section B covers donations over $5,000 and requires signatures from both the qualified appraiser and an authorized official of the charity.⁸

Over $500: description of the property on Form 8283, Section A.³
Over $5,000: qualified appraisal required, with the appraisal information attached on Form 8283, Section B. Publicly traded securities and certain other readily valued property are exempt.³
Over $500,000: the full qualified appraisal itself must be attached to your return.³

The $5,000 threshold applies per item or per group of similar items, not to the total of all your donations. Five paintings to the same museum are measured individually. Five similar prints are grouped together.

What Makes an Appraiser Qualified

A qualified appraiser has verifiable education and experience valuing the specific type of property you donated, performs appraisals regularly for compensation, and demonstrates expertise in the relevant asset class. The appraiser cannot be you, the charity, or an employee of either. The written appraisal must include a detailed description, the contribution date, the FMV, the valuation method, and the appraiser’s qualifications.

Whether You Can Deduct the Appraisal Fee

Appraisal costs cannot be included in the charitable contribution itself. Starting in 2026, miscellaneous itemized deductions subject to the 2-percent-of-AGI floor are available again after being suspended since 2018, and appraisal fees for charitable donations fall into that category, deductible only to the extent your total miscellaneous expenses exceed 2 percent of AGI.¹²

Penalties for Overvaluation

Get FMV substantially wrong and the IRS adds an accuracy-related penalty on top of disallowing the excess deduction.¹³ Two tiers apply:

Substantial valuation misstatement, claimed value 150 percent or more of the correct value: 20 percent of the resulting tax underpayment.
Gross valuation misstatement, claimed value 200 percent or more of the correct value: 40 percent of the underpayment.

These penalties apply only when the underpayment exceeds $5,000 for individuals.¹⁴ You can avoid them by showing reasonable cause and good faith, which generally means you relied on a competent qualified appraiser, gave that appraiser complete information about the property, and had no reason to doubt the resulting figure.¹⁵ Hiring a qualified appraiser and cooperating with the process is the strongest protection, and it’s where donors who face penalties usually fell short.

1
Internal Revenue Service. Publication 561 – Determining the Value of Donated Property
2
Internal Revenue Service. Publication 561 – Determining the Value of Donated Property
3
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
4
eCFR. 26 CFR 20.2031-2 – Valuation of Stocks and Bonds
5
Internal Revenue Service. A Donor’s Guide to Vehicle Donation
6
Internal Revenue Service. Form 1098-C – Contributions of Motor Vehicles, Boats, and Airplanes
7
Internal Revenue Service. IRS Notice 2014-21
8
Internal Revenue Service. Instructions for Form 8283
9
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
10
Internal Revenue Service. Topic No. 506 – Charitable Contributions
11
Internal Revenue Service. Form 8283 – Noncash Charitable Contributions
12
Congressional Research Service. Expiring Provisions in the Tax Cuts and Jobs Act
13
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
14
Internal Revenue Service. The Section 6662(e) Substantial and Gross Valuation Misstatement Penalty
15
Internal Revenue Service. Penalty Relief for Reasonable Cause