The IRS Definition of Fair Market Value (Publication 561)
IRS Publication 561 is the authoritative IRS document on valuing donated property. It defines fair market value as:
“The price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.”
Three elements make up the willing-buyer/willing-seller test:
- Neither party is under compulsion. The buyer is not forced to buy; the seller is not forced to sell. A liquidation sale price does not reflect FMV.
- Both parties have reasonable knowledge. Each side knows the condition, age, and relevant characteristics of the item. Ignorance of a defect does not inflate FMV.
- The transaction is hypothetical and open-market. FMV is what the item would sell for publicly, not in a private sale between relatives or in a specialized market.
The result is a current-condition transaction price — what someone would actually hand over cash to own the item today, as-is.
What Fair Market Value Is NOT
The IRS explicitly excludes several common pricing references from the FMV calculation:
- Not the original purchase price. A $200 jacket bought three years ago is not worth $200 today. Depreciation from use reduces value.
- Not current retail price. The cost to buy the same item new at a store is replacement cost, not FMV for a used donation.
- Not insurance replacement value. Insurance values are designed to make a policyholder whole, not to reflect actual used-market prices.
- Not sentimental value. The IRS does not recognize personal attachment as a component of FMV. An heirloom worth $50 on the open market has an FMV of $50.
The Condition-Tier System
Condition drives what a buyer will pay: the same category of item can differ widely in value depending on wear. The Excellent, Good, Fair, and Poor tiers below are our editorial aid for placing an item within a value range. They are not IRS grades, and the IRS publishes no percentage of retail price for any of them. IRS Publication 526 sets the separate, minimum standard for deductibility.
| Condition Tier | Description | Where it falls |
|---|---|---|
| Excellent | Like new; possibly still has tags; no visible wear | Top of the value range for similar items |
| Good | Gently used; minor wear; fully functional and complete | Middle of the value range; meets “good used condition” |
| Fair | Visible wear; functional but shows significant use | Borderline: decide if it still meets “good used condition” |
| Poor | Non-functional, broken, or missing key parts | Below good used condition; generally not deductible |
Fair condition is a judgment call. Clothing and household items that fall below the “good used condition or better” standard in Publication 526 are not deductible unless a single item is claimed at more than $500 with a qualified appraisal and Form 8283 Section B. In that case the qualified appraisal sets the value, not a percentage of retail.
Poor condition items generally cannot be deducted, whatever a buyer might pay for them. The only exception under Publication 526 is a single item claimed at more than $500 with a qualified written appraisal and Form 8283 Section B. Even then, the appraiser must assign a supportable value — a broken appliance worth nothing to a buyer cannot be inflated through appraisal.
FMV Reference Table by Category
These ranges reflect realistic thrift-market and online marketplace sold-listing prices, and they match the item-level tables in our Goodwill donation value guide and its category sub-guides. Use them as a starting point and cross-check against current comparable sales in your area.
| Category | Good Condition FMV | Excellent Condition FMV |
|---|---|---|
| Men’s dress shirt | $4–$8 | $9–$12 |
| Women’s jeans | $5–$10 | $11–$16 |
| Men’s suit | $20–$45 | $50–$75 |
| Men’s shoes | $5–$15 | $16–$30 |
| Sofa | $50–$140 | $150–$250 |
| Dresser | $30–$70 | $75–$120 |
| Flat-panel TV (32–50”) | $50–$120 | $125–$200 |
| Laptop (5+ years old) | $30–$60 | $65–$100 |
These figures assume items are complete, functional, and free of damage beyond normal wear. A sofa with a broken leg or a laptop with a cracked screen falls below good used condition and generally cannot be deducted (see the one exception under the good used condition rule below).
When the IRS Requires a Qualified Appraisal
Most clothing and household item donations do not require an appraisal. However, the IRS mandates one in several situations:
- Single item or group of similar items exceeding $5,000 in claimed value: A qualified appraisal must be obtained, and Form 8283 Section B must be completed and attached to your return. “Similar items” means property of the same category — ten donated paintings are grouped together, not counted individually. Our Form 8283 instructions cover Section A vs Section B and the appraisal requirement step by step.
- Art claimed at $20,000 or more: Attach a complete copy of the signed appraisal to your return. The IRS can also ask for a photograph of the artwork.
- Clothing or household items not in good used condition: A single item claimed at more than $500 needs a qualified appraisal, attached to your return with Section B.
- Vehicles, boats, and aircraft: These follow a separate rule. The deduction is generally limited to the gross proceeds the charity receives from selling the vehicle. The charity sends a Form 1098-C to both the donor and the IRS; the donor’s deduction is based on the amount on that form. See our car donation tax deduction calculator for the full rules, including when you can claim FMV instead.
A qualified appraiser is someone who holds a recognized appraiser designation (or meets the IRS education and experience requirements), regularly performs appraisals for compensation, and is not the donor or the donee charity. The appraiser must sign and date the appraisal no earlier than 60 days before the donation, and you must receive it before the due date (including extensions) of the return on which you first claim the deduction.
How to Determine FMV in Practice
The IRS publishes no per-item price list and no percentage of retail price. You work out fair market value from what buyers actually pay for similar used items, and you keep the records that show how you did it.
1. Thrift shop value (clothing and household items). The Form 8283 instructions (Rev. 12-2025), Section A column (i), name “thrift shop value” as the method for clothing or household items. For clothing, Publication 561 says “the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value.” Publication 526 adds that for household items “formulas (such as using a percentage of the cost to buy a new replacement item) aren’t acceptable,” and that for clothing “There are no fixed formulas or methods.” So do not start from the original price and apply a percentage.
2. Donor research. To find what similar used items sell for, check thrift and consignment shop prices and charity-published valuation guides. Our Goodwill donation value guide walks through price ranges category by category. Online marketplace sold listings can serve as a cross-check. These are research aids: the IRS does not endorse any particular guide, so record which sources you used.
3. Professional appraisal. Required for items over $5,000 (as described above) and worth considering for any high-value item where research produces a wide range of values or where the item has unusual characteristics (vintage, collectible, rare).
A donation tracker is a recordkeeping tool, not an IRS-recognized valuation method. In DeductAble, AI identifies each item and matches it to a fair market value from our catalog that you review and approve. Confirm any catalog value against what similar used items sell for, and the app stores the result for your records.
For most household donations, methods 1 and 2 are sufficient. Document your sources. Print or save the prices you relied on, note the date you checked them, and keep this documentation with your tax records for at least three years.
The Good Used Condition Rule
IRS Publication 526 contains a specific restriction on clothing and household items that does not apply to other property types. To qualify for a charitable deduction, these items must be in “good used condition or better.”
This rule has a direct effect on what you can deduct:
- A dress shirt that looks worn out, such as one with a frayed collar or heavy pilling, falls below good used condition and does not qualify. Minor fading or softening from normal washing does not disqualify a shirt.
- A non-functional microwave, a shirt with permanent stains, or shoes with worn-through soles are below good used condition, so they cannot be deducted.
- The charity accepting the items does not determine deductibility. Even if Goodwill accepts a bag of mixed items, you may not deduct items within that bag that fall below good used condition.
One exception: A single item claimed at more than $500, with a qualified written appraisal and Form 8283 Section B, can be deducted even if it falls below good used condition. In practice, this exception applies mainly to antiques, collectibles, or specialty items that a charity accepts specifically for auction.
Frequently Asked Questions
How does the IRS define fair market value for donations?
According to IRS Publication 561, fair market value is “the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.” The key standard is what a real buyer would actually pay for the item in its current condition — not what it cost new, and not what a store charges for a new version today.
Is fair market value the same as retail price?
No. Fair market value for donated used property is almost always substantially less than current retail price. The IRS explicitly states that FMV is not the replacement cost of a new item. A dress shirt that retails for $30 new might have an FMV of only $4–$12 when donated, depending on condition.
Is there a percentage of the original price I can use to value donated clothing?
No. The IRS publishes no percentage of the original or retail price, and IRS Publication 526 says that for household items, “formulas (such as using a percentage of the cost to buy a new replacement item) aren’t acceptable” and that for clothing “There are no fixed formulas or methods.” For clothing, Publication 561 says “the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value.” Start from what similar used items sell for, not from what you paid.
What is the “good used condition” rule for charitable donations?
IRS Publication 526 requires that donated clothing and household items be in “good used condition or better” to qualify for a deduction. Items that fall below this threshold — meaning they are heavily worn, broken, or missing key components — generally cannot be deducted, whatever a buyer might pay for them. The only exception is a single item claimed at more than $500 with a qualified written appraisal and Form 8283 Section B.
When does a charitable donation require a qualified appraisal?
A qualified appraisal is required when a single donated item, or a group of similar items donated in the same tax year, is valued over $5,000. A qualified appraiser prepares it, and Form 8283 Section B summarizes it. You usually keep the appraisal with your records, but you must attach it for art claimed at $20,000 or more, and the IRS can ask for a photograph of the art. Vehicles, boats, and aircraft claimed at more than $500 require Form 1098-C or an equivalent written acknowledgment from the receiving charity.
How do I find fair market value for donated furniture?
Search eBay completed listings or Facebook Marketplace sold listings for the same or similar furniture pieces in comparable condition. Charity-published guides from Goodwill provide ranges for common furniture categories. A used sofa in Good condition typically has an FMV of $50–$140; an Excellent condition sofa can reach $150–$250. A dresser in Good condition is generally worth $30–$70, and $75–$120 in Excellent condition.
What IRS publication covers fair market value for donations?
IRS Publication 561, “Determining the Value of Donated Property,” is the primary reference. It covers the willing-buyer/willing-seller definition of FMV, valuation methods by property type, and the qualified appraisal requirements. IRS Publication 526, “Charitable Contributions,” is the companion document covering the good used condition rule, deduction limits, recordkeeping requirements, and Form 8283 filing thresholds.
Can I use eBay sold prices to determine fair market value?
They can help as research, but they are not the method the IRS names for clothing or household items. The Form 8283 instructions name thrift shop value for those, so use sold-listing prices as a cross-check against thrift and consignment shop prices rather than a substitute for them. Use eBay’s “Sold listings” filter — not active listings — to see what buyers actually paid for items in similar condition. Save the URLs or screenshots of the listings you relied on, so you have support for your valuation if questioned, and compare items of the same general age, brand, and model where possible.
