appraise

An appraisal is a document that formally describes the value of a piece of property, usually exceeding $5,000. For example, let’s imagine that John Doe wants to donate a painting to his favorite charity. He believes the painting is worth $20,000. Instead of simply putting a $20,000 deduction on his tax return for the year, John Doe hires an appraiser to determine how much the painting is worth. A qualified appraiser provides an independent estimate, putting the value of the painting at $22,000. John Doe files IRS Form 8283 with his tax return and deducts $22,000.

Although almost anybody can estimate the value of goods or services, the IRS has very strict guidelines about who can be a "qualified appraiser." Among other things, the appraiser must have a professional appraiser designation from a national appraiser organization, perform appraisals regularly, meet certain education requirements and meet other guidelines as the IRS deems necessary. In many cases, a qualified appraiser can’t be the donor, the donee, anyone party to the acquisition of the property, or an employee or relative of anyone involved.

Appraisers charge a fee for appraisals, though for qualified appraisers, the fee cannot be based on or a percentage of the value of the property appraised. The cost of the appraisal itself is also not deductable as a charitable contribution, though it might be deductible elsewhere depending on the donor’s tax situation. Sometimes charities pay the appraisal fee, but some types of charities are restricted from doing so.