The days are longer. The flowers have bloomed. Spring cleaning is done. And you can’t drive a mile without seeing a sign for a garage sale. Leer en Español.
Whether you call it a garage sale, yard sale, tag sale, lawn sale, rummage sale or something else entirely, they are frequently an annual sign of warmer temperatures and new beginnings. They’re also a good way to get a great deal.
But, is hosting your own sale worth it? If you’re anything like me, the idea of selling all my unused junk instead of tossing it out is alluring. However, the time and effort involved can be daunting. Often, everything ends up back in the basement for another year.
This year is different. I’m not only throwing a garage sale, but doing the hard math to help you decide whether you should have one too.
First Things First
If you donate all those items you no longer need, you can qualify for a charitable deduction on your tax return. You can claim donations of money, property (must be in good condition or better) and more. The donations must be made to a qualified charitable organization, recognized by the IRS. There are also certain documents you should keep to prove the donation.
What is a Deduction?
A deduction lowers your taxable income. It does not directly lower the amount of taxes you owe. For example, if my taxable income was $29,000 and I made a $1,000 charitable donation, I would owe taxes on $28,000. A charitable deduction can only be claimed up to a certain percentage of your income – usually 50%, but sometimes as low as 30% or 20%, depending on your situation. The most important thing to understand is that donating a certain amount of money (or property, like clothes and furniture) does not mean you get that amount directly “off” your taxes.
The Numbers
When deciding whether to donate or sell, it’s important to figure up not only the value of your items, but of your time and supplies. Here’s my method.
- Clean out the house.
- As items are set aside, make a list that notes their condition.
- Look up the potential value of the item using The Salvation Army’s guide. This is helpful to determine the value of your property, if you were to claim it as a deduction on your tax return.
- Buy stickers and price each item.
- Make signs (purchase posterboard) and advertise in local places like Craigslist.
Total time involved: maybe four hours. At $15 an hour, my time is worth $60. Plus the cost of posterboard and stickers, let’s call it $70.
Now, for the sale! Here’s a look at the sale price and donation value for each item.
| Item | Sale price | Donation value |
|---|---|---|
| Christmas tree | $5 | $0 |
| Christmas garland | $2 | $0 |
| Broken snowman decoration | $2 | $0 |
| White console table | $10 | $10 |
| Round end table | $2 | $10 |
| Five-drawer dresser | $0 | $20 |
| Three-drawer dresser | $0 | $10 |
| Drafting table | $0 | $0 |
| Green upholstered chair | $15 | $25 |
| Lamp with shade | $2 | $5 |
| Paper embossing kit | $10 | $0 |
| DVDs | $5 | $10 |
| Books (20) | $5 | $20 |
| Skillet | $0 | $3 |
| Plastic insulated wine glasses (4) | $4 | $4 |
| Ceramic mugs (8) | $10 | $12 |
| Purse | $5 | $5 |
| Misc. bags (4) | $0 | $8 |
| Elephant toy | $5 | $0 |
| Purple comforter | $5 | $15 |
| White bed skirt | $5 | $5 |
| Shoes (4) | $5 | $20 |
| Desk | $0 | $50 |
| Kid’s clothing (40) | $30 | $120 |
| Women’s clothing (20) | $25 | $100 |
| Women’s coat/jacket (3) | $8 | $30 |
| Men’s clothing (15) | $7 | $37 |
| TOTAL | $167 | $519 |
So I made $167 and the donation value would have been $519. Of course, I can still donate what’s left over, but let’s set that aside. Does it seem like I should have forgone the sale and just donated it all? To determine that, we have to figure up a tax return.
Here’s what the return looks like:
| Married filing jointly, under 65, one dependent at home, both spouses work | |
|---|---|
| Total wages | $60,000 |
| Federal income tax withheld | $4,800 |
| State income tax withheld | $2,534 |
| Mortgage interest | $8,568 |
| Charitable deduction | $519 |
Taxable income = $35,750
Total refund = $1,341
Sounds pretty good, right? Well, just for comparison, I removed the charitable deduction. The result?
Taxable income = $35,750
Total refund = $1,341
That’s right. No change. In fact, with this scenario, you would need to donate almost $800 more to a charitable organization to see a material change. Even then, you’d only get $8 more back in a refund. The reason for this is that in this scenario it is more advantageous to take the standard deduction rather than take itemized deductions. Thus, there is no benefit from the charitable contributions.
Everyone’s situation is different, of course. You can run the numbers using H&R Block’s tax calculator.
For a comparison, let’s look at the same tax scenario with a higher income. As your income goes up, you may see a bigger change in the impact of that charitable donation.
| Married filing jointly, under 65, one dependent at home, both spouses work | |
|---|---|
| Total wages | $140,000 |
| Federal income tax withheld | $21,488 |
| State income tax withheld | $11,839 |
| Mortgage interest | $8,568 |
| Charitable deduction | $519 |
Total refund = $2,969
Without the charitable deduction = $2,840
That’s a difference of $129
Considering the sale made you $167, minus your time and expenses ($70), you netted $97. It may have been a better use of time – and a bigger monetary gain – to just donate it all and take the deduction.
The Takeaway
The lower your income, or the lesser your other itemized deductions, the less impact a relatively small charitable donation will have on your taxes. You may as well spend the time and effort to have that garage sale, because you will get more value from it. The greater your income, or the greater your itemized deductions, the more impact a charitable donation may have on your taxes.
No matter what you decide to do, congratulations on getting the excess stuff out of the house! That is truly an accomplishment in and of itself.
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