Year end is a good time for businesses to review inventory that’s unlikely to sell. Donating excess goods to charity could free up space, support a worthy cause and potentially provide a tax break. But special rules apply. The deduction is generally limited to the lesser of the goods’ fair market value (FMV) or tax basis, though certain donations may qualify for an enhanced deduction. (Different rules may apply to inventory acquired during the year.) You also can’t deduct the same inventory costs twice. Before donating, determine the goods’ FMV and confirm the charity’s eligibility and required documentation. Contact us to discuss this and other tax saving strategies before year end.
