The deductible part of a winning bid is generally the bid minus the item's fair market value. Redswing does the math from the value you enter.
Draft for legal review: This article describes how Redswing works in plain language. It is not tax or legal advice and an attorney has not reviewed it yet. Ask your tax advisor or attorney about your own situation.
Overview
For each item, Redswing treats the fair market value (FMV) you enter as what the winner received. The charitable portion is the winning bid minus the FMV, never below zero. Under IRS guidance, a buyer can generally deduct only the amount paid above the item's value, and a charity should give a written notice for a payment over $75 when the buyer gets something in return (IRS Publications 526 and 1771). The wording of the notice and letters is generated by Redswing. Do not write your own and do not edit it. Redswing is a technology platform and does not give tax advice.
Where to enter FMV
- The Add item form on the Auction page has a Fair market value ($) field. Editing an item shows it too.
- When you add items with CSV template and Import items, fill the fair_market_value column.
- Ask AI can create an item with an FMV. If an item has no FMV entered, Redswing treats it as having no value to the winner, so the letter shows the whole bid as the charitable portion. That is almost never right, because an auction winner always receives the item. Enter an FMV for every item before you download letters.
Get the letters
- Make sure winners are set and paid.
- Open Tax receipts and enter your EIN and mailing address.
- Click Download all letters (PDF). It includes auction wins that have a winning bid. See Sending tax-deductible receipts.
Example (illustration only)
A guest pays $2,000 for a package with a $1,200 FMV. The charitable part would be $800. FMV should be a good-faith estimate, for example what a similar package sells for. The IRS does not require an appraisal for this estimate. A donor's own valuation is a starting point, not a final answer.
Questions your organization may have
- Do I need to file anything with the IRS for the auction? That depends on your organization and the items. For example, people who donate items may have their own forms (such as Form 8283 for noncash gifts over $500), and an organization that sells certain high-value donated property may have a filing of its own (such as Form 8282). Ask your tax advisor. Redswing does not file anything for you.
- Who decides FMV? Your organization, usually with the item donor's help.
Things to know
- Items won with a bid and paid in cash or a check are handled the same way.
- Letters list contributors by name and email as entered.