The key to determining an accurate deduction for charitable donations is understanding
their fair market value. The IRS defines fair market value as "the price at which
property would change hands between a willing buyer and a willing seller, with neither
being required to act, and both having reasonable knowledge of all the relevant facts."
For example, you know that average price of a pair of men's denim jeans at your local thrift shop is $9. These jeans are not an expensive designer brand, and on average show some wear, but most people would consider them useful and wearable. According to ItsDeductible definitions, these jeans could be considered to have medium value. Therefore, $9 is the fair market value of a pair of men's denim jeans of medium value. Note that the fair market value of donated goods is typically less than what you originally paid for them. There are no fixed formulas for determining the value of these goods, other than to know what similar goods are being bought and sold for.
The IRS recommends that you visit stores that sell used goods (such as thrift and consignment stores) and see what similar items are selling for, to determine the fair market value for your donations. If you have owned an item for less than one year, the most you can deduct is the amount you paid for that item. If you have owned the item for more than one year, then you can deduct the current and actual fair market value, even if it that fair-market-value is more than you originally paid for the item.