Fair Market Value (FMV) is what property is worth today on the open market.
It’s the price someone would reasonably pay for it—not what it cost when it was new.
FMV assumes:
- A buyer and seller both agree
- No one is forced to buy or sell
- Both sides know what the property is
🏠 Why It Matters for Your Taxes
FMV helps determine:
- How much you can deduct for non-cash charitable donations
- Your gain or loss when you sell property
- The starting value (basis) of inherited or gifted property
- The value used for casualty or theft losses (when allowed)
- Values used in real estate and investment reporting
🛠️ Example
You donate a used sofa to a qualified charity.
- You paid $1,000 when it was new
- Its value today (FMV) is $200
✅ You can deduct $200, not the original $1,000 purchase price.