Ask an AI Accountant

The taxable value of an item won at a charity auction is generally the amount the winning bidder paid for the item, minus the fair market value of the item. So, if someone bid $500 for a painting that's worth $200, the taxable value would be $300. This is because the bidder is considered to have made a $300 donation to the charity.

However, it's important to note that the bidder can only deduct this amount if they itemize their deductions on their tax return. If they take the standard deduction, they can't deduct any part of their bid.

Also, the charity should provide the winning bidder with a written acknowledgment that states the amount of the winning bid and the fair market value of the item. The bidder will need this documentation to claim a deduction on their tax return.