By Lynn Magnusson, ASA with Becky Lipnick
Many households donate personal property like clothing, furniture, artwork, or collections to a non-profit organization in order to take an income tax deduction. If you need to consult an appraiser for your personal property donation, shouldn’t that appraiser meet IRS standards?
IRS Publication 561 defines a “Qualified Appraiser” for the purpose of evaluating charitable donations.
The IRS Definition Includes These Requirements
- Accredited by a recognized professional appraiser organization.
- USPAP-Compliant: Follows the Uniform Standards of Professional Appraisal Practice, which Congress authorized the Appraisal Foundation to define.
- Professional: Regularly prepares appraisals for a fee.
- Competence: Is an expert examiner of the type of item in the appraisal.
- Preferred Providers: Insurance companies have preferred providers for appraisals (i.e., The Magnusson Group is a Preferred Provider for Chubb and AIG).
- High-Quality References from your peers and previous clients. Because personal property appraisers are not licensed, like real estate appraisers, by a state agency, you should ask a trustworthy colleague or professional for a recommendation.
What Does It Mean To Be Accredited?
You can trust an appraiser who is accredited by one of the top three national and international associations offering accreditation. They are the ASA (American Society of Appraisers), AAA (Appraisers Association of America), and the ISA (International Society of Appraisers).
To achieve accreditation from these organizations, an appraiser must pass a series of tests in core subject areas:
- Appraisal methodology
- Connoisseurship in a specialization area
- Report writing
- Professional standards, i.e., USPAP
- IRS guidelines
All Certified or Accredited Members of the top professional organizations are required to take a prescribed minimum number of hours of Continuing Education to retain membership in good standing. For the ASA, 100 hours are required every five years!
Some appraisers (myself included) obtain additional credentials in particular sub-specialties. And Gems & Jewelry appraisers who are designated Master Gemologist® Appraisers also must take precious stone and jewelry exams on a regular basis to remain current.
WHAT IS USPAP COMPLIANCE?
USPAP: Uniform Standards of Professional Appraisal Practice. A set of standards for valuing anything.
- The Appraisal Foundation and Congress established mandatory industry standards — USPAP — in response to the 1980’s Savings and Loan Crisis.
- USPAP governs appraisals of businesses, real estate, machinery & equipment, in addition to personal property.
- USPAP is revised every 2 years. Therefore, an appraiser must re-qualify every 2 years by completing USPAP update course and passing an exam on the current standards.
In general terms, USPAP covers the following aspects of appraisal practice:
- Scope of work
- Records retention
- Purpose & use
- Defining and analyzing market data
This blog reprinted by permission of the author. It was originally published as How Does The IRS Define A “Qualified Appraiser?”