When you make a non-cash charitable donation over $5,000—whether it is reclaimed building materials, artwork, or furniture—you are required by the IRS to obtain a Qualified Appraisal from an IRS Qualified Appraiser. Hiring the wrong appraiser will not just impact your deduction—it could void it entirely and trigger penalties.
Some firms claim that Errors & Omissions (E&O) insurance offers protection. Let’s break down what is true, what is required, and how to protect yourself.
✅ What Makes an Appraiser IRS Qualified?
Under the Internal Revenue Code and corresponding Treasury Regulations, a Qualified Appraiser is an individual who meets strict standards when preparing appraisals for non-cash charitable contributions and other tax-related purposes. These requirements are primarily defined under IRC §170(f)(11)(E) and Treasury Regulation §1.170A-17.
To be considered a Qualified Appraiser for federal tax purposes, an individual must meet the following criteria:
- Formal Education and Experience The appraiser must:
- Have earned an appraisal designation from a recognized professional appraiser organization (e.g., International Society of Appraisers, American Society of Appraisers, Appraisers Association of America);
OR
- Meet minimum education and experience requirements, including:
- Successful completion of college- or professional-level coursework in valuing the type of property being appraised.
- At least two years of experience in buying, selling, or valuing the type of property being appraised.
- Regularly Performs Appraisals for Compensation
- Independence and Ethical Compliance The appraiser must:
- Not be the donor, the donee organization, a party to the transaction in which the donor acquired the property, or an employee, partner, or family member of any of these parties.
- Maintain independence and objectivity—they may not have a financial interest in the property or the outcome of the valuation.
- Comply with U.S. Treasury Department Circular No. 230, which governs practice before the IRS. This includes not having been disbarred, suspended, or sanctioned for ethical violations or criminal conduct. Individuals with certain criminal backgrounds or disqualifying disciplinary history are prohibited from acting as Qualified Appraisers.
- Good Standing with the IRS
- Timely and Compliant Appraisal Report To be considered “qualified,” the appraisal must be:
- Prepared, signed, and dated by the Qualified Appraiser, no earlier than 60 days before the date of the contribution and no later than the due date (including extensions) of the return on which the deduction is claimed.
- Conducted in accordance with generally accepted appraisal standards (such as the Uniform Standards of Professional Appraisal Practice, or USPAP), and must include all elements required under Treas. Reg. §1.170A-17(a)(3), including:
- A complete description of the property,
- The method of valuation,
- The basis for the valuation (e.g., comparable sales, income approach),
- The qualifications of the appraiser,
- A declaration of independence.
- Signed IRS Declaration
The appraiser must regularly perform appraisals for compensation as part of their established business practice.
The appraiser must not have been prohibited from practicing before the IRS at any time during the three years preceding the date of the appraisal.
For non-cash charitable contributions exceeding $5,000 (excluding publicly traded securities), the appraiser must complete and sign Part III of IRS Form 8283, the “Appraisal Summary,” under penalties of perjury.
❌ Red Flags to Avoid:
- Appraisers who lack accreditation or cannot produce credentials and proof of college education.
- Those who refuse to sign Form 8283—your deduction can be denied without it.
- Appraisers who produce generic or unsupported valuation reports without comparables.
- Appraisers who have a conflict of interest (e.g., employed by or affiliated with the donor or donee).
❓ Does an Appraiser’s E&O Coverage Protect an Unrelated Taxpayer/Client? Or… ?️ Why Your Appraiser’s Insurance Will Not Save You
Some firms claim that their Errors & Omissions (E&O) insurance provides coverage or assurance in the event of an IRS audit or disallowed deduction.? The Reality:
- E&O insurance protects the appraiser—not the donor.
- These policies cover damages only if the appraiser is sued and found negligent.
- The IRS does not ask about or accept insurance as a substitute for qualification.
- If your deduction is denied, you bear the full risk, even if the appraiser carries E&O insurance.
? From our article: https://www.thegreenmissioninc.com/article/appraising-your-appraiser
“No E&O policy will back up a taxpayer’s appraisal report in the eyes of the IRS. The IRS does not ask for proof of insurance. It asks for accreditation, experience, and independence.”
? Would Any E&O Policy Actually Cover a Lost Deduction?
No. Here’s why:- E&O coverage applies to claims brought against the appraiser for errors, omissions, or negligence—not to unrelated taxpayer losses due to IRS disallowance.
- These policies exclude regulatory losses, tax-related penalties, and claims by third parties with no direct contractual relationship.
- The IRS does not accept insurance coverage as a factor in determining appraisal validity.
- A donor would have to sue the appraiser, prove negligence, and win in court to even attempt recovery—and still may not recover the disallowed deduction itself.
? Citation: Sample E&O Policy Exclusions (Real-World Language)
Here is an excerpt adapted from a standard E&O policy for professional appraisers (e.g., via Victor Insurance or LIA Administrators):Exclusions:
“This insurance does not apply to:- Any claim arising from or in connection with:
- the rendering of or failure to render services to any entity or individual who is not a client of the insured;
- any claim made by or on behalf of a government agency or taxing authority;
- fines, penalties, taxes, or amounts uninsurable under applicable law;
- any loss incurred as a result of regulatory disallowance of a tax deduction or credit.”
These exclusions are common and standard across the industry. Insurers will not cover claims from third-party donors who are not direct clients, nor will they insure against IRS disallowances.
?? Why This Matters:
- This marketing claim could create false confidence among donors who think their deductions are protected.
- In reality, if the appraiser is unqualified, the donor takes the hit: deduction disallowed, potential penalties under IRC §6695A, and increased audit risk.
✅ Bottom Line:
Only an IRS Qualified Appraiser can protect your deduction.
Accreditation, experience, and independence matter. E&O insurance does not substitute for IRS compliance—and it does not cover you.
