question.jpgIn Federal Income Tax

Is there a penalty for overvaluing donated property?

When a filer grossly overvalues donated property, he or she can incur a penalty. If that property was overvalued by more than 200% of the property’s actual value, and the taxpayer ended up paying more than $5,000 less than the taxes would have otherwise been, he or she will be required to pay that difference plus another 20% of that difference. If the property was overvalued by more than 400%, the same applies but the taxpayer will be penalized 40%.