QUESTION: What is the charitable contribution for the winning bidder
of an auction item?
ANSWER: The winning bidder of an auction item can take a deduction
for the amount in excess of the value of the item. For example, a bidder pays $80 for a $50
restaurant gift certificate. Their
charitable contribution is $30—the amount the price paid exceeds the value
by. If they bid $50 for the $50 gift
certificate there would be no charitable contribution.
Another example, the
bidder pays $1,000 for a painting valued at $800. The charitable contribution would be $200.
The other side of this question is—what is the charitable
contribution for a donor of an item that will be used in the auction?
The donors charitable contribution will not be noted by the
nonprofit. The letter from the nonprofit
should say thank you for your donation of
(describe item) with no mention of the value. The donor should determine the value. The donors charitable deduction is limited to
the donors cost for the item.
For example, the donor asks the restaurant to donate a $50
gift card. The gift card sells for
$100. The donors charitable contribution
is zero. If the donor purchased the
gift card for $50 and donated it to the auction, their charitable contribution
would be $50.
In the painting example, the artist who donated their own
painting that would normally sell for $800 at a gallery, gets a charitable
contribution only for the supplies—paint, canvas, etc. Their time is not valued.
