Valuation misstatement penalty
An accuracy penalty that applies when a claimed value substantially or grossly exceeds the correct value of donated property.
Publication 561 carries a penalty section describing an accuracy-related penalty for overstating the value of donated property. It describes a 20% penalty for a substantial valuation misstatement and a 40% penalty for a gross valuation misstatement, with the tiers keyed to how far the claimed value exceeds the correct one.
The exact thresholds and the way the penalty interacts with reasonable-cause relief are set out in the publication, and they change what a careless round number costs. Read the penalty section before deciding that a generous estimate is harmless, and take an unusual valuation to a professional.
The defensive posture is straightforward: claim a range you can point to a source for, keep a photo, and note anywhere you overrode a suggested value. DeductiBee flags manual overrides in its exports for exactly this reason.
Sources
- Publication 561 (rev. December 2025), Determining the Value of Donated Property, full textIRS, IRS publication
- Publication 561, Determining the Value of Donated PropertyIRS, IRS publication
Definitions describe the rule as published. They are not tax advice, and almost every threshold above has an exception attached to it in the underlying publication. Confirm anything that affects a return with a qualified tax professional.
Related terms
Fair market value (FMV)
The price property would sell for on the open market between a willing buyer and a willing seller, both informed and neither under compulsion.
Qualified appraisal
A formal written valuation, prepared by a qualified appraiser under professional standards, generally required for deductions over $5,000.
Condition tier
The grade assigned to a donated item, which selects a value range. DeductiBee uses Like new, Good, and Fair, and deliberately has no lower tier.
FMV factors
The four considerations Publication 561 lists for arriving at fair market value: cost or selling price, comparable sales, replacement cost, and expert opinion.
Values with the source attached
DeductiBee applies a cited fair-market-value range to everything you donate, keeps the photo with the record, and exports a Form 8283 worksheet when you file.
