Taxes and fashion. These are two terms you don’t often see used in the same sentence. I’m not going to lie, that’s perfectly okay with me.
Lately, when I hear people discuss whether or not they would create a capsule wardrobe I get a lot of this, “If I get rid of all the clothes I don’t love, I’ll have nothing to wear.” While this statement might not be entirely true, having only 10 items left in your closet is a valid concern and would result in figuring out how to afford, as well as complete, the rest of your wardrobe.
After going through my own closet cleanout which may or may not have resulted in 14 bags of clothes, 14 people! I discovered a simple way to earn money by getting rid of the clothes I didn’t love so I could afford the ones I do. No, it’s not as sexy as ThredUp, but in the end it gives you the same result. To simply earn money on the items you no longer love. Tis' the season of taxes.
Taxes are kind of strange in the sense that we’ve become so accustomed to having them taken out of our monthly paycheck that it’s hard to imagine a deduction here and there making an impact. I’m here to tell you it does. The next time you’re trying to decide how to sell your clothes to earn a small percentage back, think about a simple donation instead. So here it goes... a lesson in taxes and fashion.
Earn Money To Kickstart Your Capsule Wardrobe.
Step 1: Download Intuit’s ItsDeductable App
You’ve probably already heard that by donating your clothes to an organization you can receive a tax deduction. What you may have missed is that there is an estimated value based on the item you’re donating. The ItsDeductible app shows you an acceptable estimated value from the government, for each clothing item.
It breaks down each item into categories that you can select such as Men’s or Women’s Jeans. Then displays an estimate on what each item is worth based on the quality.
Step 2: Begin Your Closet Cleanout
During the Capsules Closet Cleanout process we recommend that you separate your clothes into two piles. Pile one is made up of everything you love and pile two is everything you don’t.
While going through this process you can use the ItsDeductable app to catalog items you’d like to donate in pile two. Check off the type of item (t-shirt or jeans etc…) and its associated value (High or Medium).
Step 3: Donate your clothes
Find a local store you’d love to support and drop off your clothes. Show your itemized list to the clerk to receive your tax deductible receipt. Last but not least, hold onto your receipt come tax season.
Step 4: Use Your Savings to Kick Start Your Capsule
Tax deductions lower your tax basis. In other words, receiving a tax deduction lowers your taxable income. So when you go to file your taxes you’ll owe less based on the amount of money you bring in. Got it? Basically, your income goes down based on your donation (deduction) so you’ll owe less taxes (more money you get to keep).
Every person has what they call a marginal tax rate. (Yawn.) Based on your salary the government has put you in a tax bracket. (Yawn, again.) This can be found here.
For example, let’s say you fall under the 25% tax bracket. If you took the total amount you donated, let’s say $1000 worth of clothes, multiplied by 25% you would receive $250 in tax savings. Let me repeat: you would have made an estimated $250 to start your capsule!
This is money you wouldn’t owe the government or that the government would pay you back depending on your situation. Money you simply earned by donating a pile of clothes you no longer loved. No selling. No fuss.
So there you have it, the next time you’re debating whether or not you can afford to start your capsule think about making a donation.
Disclaimer: Please consult with your accountant. We do style, not taxes.