Have you ever wondered if you’re better off selling the stuff your kids outgrow or donating it? I have been donating stuff, in part because it’s just so easy, but I’ve also read that from a tax standpoint I get more money in my pocket. So I decided to actually check, and I was wrong!
I consigned 18 items at a Fall consignment sale this year. One wool coat and 17 toys. The consignment sale got 30% of the proceeds and I got 70%. I opted to not sell anything for half-price (most sales have a half-price sale on their last day or half-day) and said I’d pick the items up if they didn’t sell. This sale would not provide me with a donation receipt, so I wanted the stuff back so I could donate it and get a receipt for my taxes.
Per the sale instructions, my items were priced at 25-30% of the retail price. I used the internet to price the items. If everything I consigned sold, the proceeds would be $181. My 70% cut of that is $126.70 so I’d get $119.70 after my $7 participation fee is deducted.
If I were to donate those items I’d use the $181 value, since I’d consider that a “fair market value” of the items (IRS terminology). Since we have a mortgage we always itemize deductions (if you don’t itemize you’re definitely better off selling your stuff, unless you donate so much that it’s over the standard deduction). So this batch of items would lower our taxable income by $181. How much money you’d save then depends on your tax bracket.
Since I’m “married filing jointly” I’d use these figures for 2012, for other filing statuses go here):
- 10% on taxable income from $0 to $17,400, plus
- 15% on taxable income over $17,400 to $70,700, plus
- 25% on taxable income over $70,700 to $142,700, plus
- 28% on taxable income over $142,700 to $217,450, plus
- 33% on taxable income over $217,450 to $388,350, plus
- 35% on taxable income over $388,350.
So depending on your income, this $181 deduction would save you between $18.10 (10% bracket) and $63.35 (35% bracket) on your taxes. So the consigning option is a much better deal as I get $119.70 and I get it now, not next April.
Obviously the quality and condition on your items comes into play here, as well as the amount of time it takes to prepare the items for sale. Stuffing them in a trash bag and driving them to Goodwill is certainly easier! Some sales will do the prep work for you, with you getting about 40% of the proceeds. They don’t always advertise this option, so ask if you’re interested. I know moms with closets bursting with toys, and schedules that are booked solid, this is a great option for them!
Here are some other consigning tips from the moms:
- As my kids outgrow their clothes I go ahead and put them on a hanger and hang them (out of the way) in the guest room. Then they are ready when it is consignment sale time.
- There is a great pricing guide at Consignment Mommies
- When you buy new clothes, keep the hangers!
- Make sure your items look as good as possible, which might mean you have to iron!
- Consign at one of the earlier sales so you can take unsold items (and whatever else you pull out) to a later sale.
- Before you sign up for a sale, read through the instructions and see how they handle item drop-off. I consigned at one that was a nightmare at drop-off. Took forever!
Ready to consign? Check this page for a link to a post of the current sales. Fall/Winter sales typically go from mid-July to October. Spring/Summer sales go from February to April. If you want to consider a consignment store check out this post. For a list of local online sales options go here. And if you want to donate your items we’ve got that list too, right here.
Please note: I am not a CPA or a tax attorney! I’m a mom with an MBA and lots of experience with TurboTax (which I highly recommend). Tax laws change each year, and if you’re subject to the Alternative Minimum Tax (AMT), donate a very high percentage of your income or the laws change these calculations won’t apply to you.