Definition / Example of Qualified Appraisal
How Qualified Appraisal Works
Qualified Appraisals for Individuals
Definition / Example of Qualified Appraisal
A qualified appraisal is an assessment of the value of an item or group of items, such as real estate or art, that is conducted by a qualified professional.
Definition and Example of Qualified Appraisal
A qualified appraisal is an independent verification of the value of the donated property. A qualified appraisal is often required for non-cash charitable contributions of any item or group of items valued over $5,000. If you are donating a piece of art, you cannot just say that the artwork is worth $10,000 in order to get a significant deduction for your charitable contribution. You must obtain a qualified appraisal to support your claim.
It is usually sufficient to attach the qualified appraisal to your tax return if you are claiming a tax deduction of more than $500,000 for donated property. Otherwise, for all donations valued over $5,000 up to $500,000, you can keep a copy of the qualified appraisal for your records. However, you need to file Form 8283 to report this information.
However, certain rules apply based on the type of property donated. You must obtain a qualified appraisal for artwork valued over $5,000, but you must also submit the qualified appraisal with your tax return if the artwork is valued at $20,000 or more.
The property must be reviewed by a qualified appraiser to be considered a qualified appraisal. One of the key requirements is for the appraiser to have “an appraisal designation from a generally recognized professional appraisal organization,” according to the Internal Revenue Service (IRS). They may also meet similar educational and professional experience requirements as specified by the IRS.
How Qualified Appraisal Works
A qualified appraisal works by conducting a review of the value of the property you are donating. The appraisal must be dated within the period extending from 60 days before the donation to the date of the donation. The appraiser must assess the value of the property based on this preceding timeframe if the appraisal was conducted after the donation.
The qualified appraisal must also be conducted “before the due date, including extensions, of the return on which the charitable contribution deduction for the donated property is claimed,” according to the Internal Revenue Service.
Another factor to consider is that you usually cannot pay a percentage of the appraised value as a fee to the appraiser. This means that the appraiser will receive more money if the item is appraised at a higher value.
You generally must obtain separate appraisals for each contribution if you make multiple donations that meet the minimum requirements for qualified appraisal. However, there is an exception if a group of similar items constitutes a single donation in one tax year.
The Internal Revenue Service is not required to follow the appraiser’s opinion when determining the value of an item.
Qualified Appraisals for Individuals
Qualified appraisals often apply to relatively large donations, so this may not be a tax planning issue that many people face frequently. However, individuals who typically make large non-cash charitable contributions may want to pay close attention to these rules.
Although most qualified appraisals apply to items of relatively high value, some individuals may need a qualified appraisal when donating clothing or household goods that are eligible for a deduction in excess of $500. However, this requirement applies only to donations of items that are not in “good condition or better,” according to the Internal Revenue Service.
Individuals donating vehicles may be required to file Form 8283, but they typically do not need a qualified appraisal in this situation.
Taking
The main lesson: A qualified appraisal involves an evaluation of donations. Qualified appraisals are generally required when claiming a deduction for non-cash charitable contributions valued over $5,000. The appraisal must be performed by a qualified appraiser who meets certain requirements supporting their ability to conduct appraisals.
Sources:
IRS. “Publication 561: Determining the Value of Donated Property,” Page 8.
IRS. “Publication 561: Determining the Value of Donated Property,” Page 9.
IRS. “Publication 561: Determining the Value of Donated Property,” Page 4.
IRS. “Publication 561: Determining the Value of Donated Property,” see “Qualified Appraisals.”
IRS. “Publication 461: Determining the Value of Donated Property,” Page 10.
IRS. “Publication 561: Determining the Value of Donated Property,” see “Valuations of Various Kinds of Property.”
Source: https://www.thebalancemoney.com/what-is-a-qualified-appraisal-5221098
Leave a Reply