Determining FMV: Valuing Charitable Donations (2025 IRS Guide)

This guide covers “Determining FMV” within valuing charitable donations. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 561 (12/2025), Determining the Value of Donated Property, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Determining FMV

Determining the value of donated property depends upon many factors. You should consider all the facts and circumstances connected with the property, including any recent transactions, in determining value. Value may also be based on desirability, use, condition, scarcity, and market demand for that property. Depending on the type of property, there may be other characteristics that are relevant in determining its value.

Cost or Selling Price of the Donated Property

The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold at a time that is reasonably close to the date of contribution.

The cost or selling price is a good indication of the property’s value if:

• The purchase or sale took place close to the valuation date in an open market,

• The purchase or sale was at “arm’s-length,”

• The buyer and seller knew all relevant facts,

• The buyer and seller did not have to act, and

• The economic conditions in the open market did not change between the date of purchase or sale and the valuation date.

Example.

Bailey Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. The promoter claimed that the price was “wholesale” even though this dealer and other dealers made similar sales at similar prices to other persons who were not dealers. The promoter said that if Bailey kept the gems for more than 1 year and then gave them to charity, Bailey could claim a charitable contribution deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. Bailey gave the gems to a qualified charity 13 months after buying them.

The selling price for these gems had not changed from the date of purchase to the date Bailey donated them to charity. The best evidence of FMV depends on actual transactions and not on some artificial estimate. The $5,000 paid by Bailey and others is, therefore, the best evidence of the maximum FMV of the gems.

Terms of the purchase or sale.

The terms of the purchase or sale should be considered in determining FMV if they influenced the price. These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property.

Rate of increase or decrease in value.

Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm’s-length sales.

Example.

Corey Brown bought a painting for $10,000. Thirteen months later, Corey gave it to an art museum, claiming a charitable contribution deduction of $15,000 on their tax return. The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Corey held the property.

Arm’s-length offer.

An arm’s-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property.

Sales of Comparable Properties

The sales prices of properties similar to the donated property are often important in determining the FMV. The weight to be given to each sale depends on the following.

• The degree of similarity between the property sold and the donated property.

• The time of the sale—whether it was close to the valuation date.

• The circumstances of the sale—whether it was at arm’s-length with a knowledgeable buyer and seller, with neither having to act.

• Whether the comparable sale is from the same market area as the donated property.

• The conditions of the market in which the sale was made—whether unusually inflated or deflated.

The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property.

Example 1.

Martha Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of a religious book. The promoter had claimed that the price was considerably less than the “retail” price and gave Martha a statement that the books had a total retail value of $30,000. The promoter advised that if Martha kept the books for more than 1 year and then gave them to a qualified organization, Martha could claim a charitable contribution deduction for the “retail” price of $30,000. Thirteen months later, all the books were given to a house of worship from a list provided by the promoter. At the time of the donation, wholesale dealers were selling similar quantities of books to the general public for $10,000.

Because Martha was not a dealer, she could not sell the books for their retail value. The FMV of the books is $10,000, the price at which similar quantities of books were being sold to the general public by wholesale dealers at the time of the contribution.

Example 2.

The facts are the same as in Example 1, except that the promoter gave Martha Black a second option. The promoter said that if Martha wanted a charitable contribution deduction within 1 year of the purchase, Martha could buy the 500 books at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. The principal and interest on the note would not be due for 12 years. According to the promoter, Martha could then, within 1 year of the purchase, give the books to a qualified organization and claim the full $30,000 retail price as a charitable contribution. Martha purchased the books under the second option and, 3 months later, gave them to a house of worship, which will use the books for religious purposes.

At the time of the gift, the promoter was selling similar lots of books for either $10,000 or $30,000. The difference between the two prices was solely at the discretion of the buyer. The promoter was a willing seller for $10,000. Therefore, the value of Martha’s contribution of the books is $10,000, the amount at which similar lots of books could be purchased from the promoter by members of the general public.

Replacement Cost

The cost of buying, building, or manufacturing property similar to the donated item may be considered in determining FMV. However, there must be a reasonable relationship between the replacement cost and the FMV.

The replacement cost is the amount it would cost to replace the donated item on the valuation date. In most cases, there is no relationship between the replacement cost and the FMV. If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important.

To determine the replacement cost of the donated property, find the “estimated replacement cost new.” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new.”

Opinions of Professional Appraisers

Generally, the weight given to a professional appraiser’s opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the professional appraiser and the thoroughness with which the opinion is supported by experience and facts. For a professional appraiser’s opinion to deserve much weight, the facts must support the opinion. For additional information, see Appraisal, later.

Table 1. Factors That Affect FMV

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 561 (12/2025), Determining the Value of Donated Property: What Is Fair Market Value (FMV)? — Determining FMV — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.