Q: We are remodeling and redecorating our home, so we plan to give a lot of our old appliances and furniture to charity and then take a charitable deduction for the items on our next tax return. We want to get the biggest deduction possible, but we don't want to get in trouble with the Internal Revenue Service. How can we determine the value of things like our old refrigerator and couch?
A: Millions of homeowners and renters donate household items to charitable organizations every year, but figuring out how large of a tax deduction they can take can be tricky.
Rules set by the Internal Revenue Service allow taxpayers to deduct the fair market value of furniture, appliances, clothes and most other items that are given to charity. The important thing to remember is that the size of the write-off must represent what the property is worth today, rather than what it originally cost.
The Internet site operated by the venerable Salvation Army (www.salvationarmyusa.org) has a useful "valuation guide" that lists ranges for various household items, including old appliances and furniture.
If you're willing to spend about $20, you also could purchase a copy of Turbo Tax's "It's Deductible" software that helps determine the value of donated items based on data from thrift shops and online auction-house giant eBay.
The computer program also automatically fills in the required IRS Form 8283, "Noncash Charitable Contributions," if the value of the donated goods exceeds $500.
Q: Our son wants to buy a home. If we give him part of the down payment but do not co-sign his mortgage application, could the bank force us to make the monthly payments if our son eventually defaults?
A: No. Parents who simply give their son or daughter cash for a down payment cannot be held responsible for repaying the bank's mortgage loan. You only could be held liable for the payments if you also co-sign his loan application.
Q: I recently inherited my mother's house and would like to rent it to tenants. The company that insures my own home will not insure rental property, and all the other companies I have contacted want to charge much more for a policy to cover the rental even though the house is only a few miles away from mine and is about the same size. What gives?
A: Some insurers flatly refuse to issue policies for a rental, fearing that tenants won't take good care of the home or that the property could become a target of vandals if it becomes vacant. Others are happy to issue such insurance, but charge higher premiums to landlords than they do owner-occupants.
As you continue shopping for a policy on the rental, ask each agent or insurer to give you a quote on coverage for your personal residence and maybe even your automobile too. Many insurers offer "multiple policy" discounts that can save their customers hundreds of dollars a year.
You might be able to arrange a "blanket policy" to cover both your home and the house you recently inherited from your mother. Blanket policies are sometimes the most cost-effective form of insurance because they allow the insurer to spread its risk over more than one property.