If you’ve been researching appraisals for estate tax, charitable donation, gift tax, or another tax-related purpose, you’ve likely encountered the term “IRS qualified appraiser.” The IRS has specific requirements for who can prepare an appraisal for federal tax purposes, and you’ll want to be sure your appraiser meets these requirements.
Why the IRS Has Its Own Standards
The IRS requires a qualified appraisal, prepared by a qualified appraiser, because there is real potential for misvaluation (whether accidental or deliberate). Inflated charitable donation values, undervalued estate assets, or undervalued gifted assets are all areas of IRS concern. Requiring a “Qualified Appraisal” is one of the ways the agency works to ensure that reported values are legitimate.
An appraisal prepared by someone who does not meet the IRS definition of a qualified appraiser is not considered a qualified appraisal. Subsequently, a deduction or filing that relies on such a report can be disallowed entirely, regardless of whether the values themselves were accurate.
Appraisers who prepare qualified appraisals for tax purposes are held accountable for their conclusions. The IRS can impose penalties on appraisers who report substantial or gross valuation misstatements on appraisals related to IRS functions. This is part of what distinguishes a qualified appraisal from an informal opinion of value: the appraiser’s professional reputation and financial liability are on the line.
What Makes Someone an IRS Qualified Appraiser?
Under IRS regulations, a qualified appraiser must meet all of the following:
- Hold active credentialing from a recognized professional organization, or have otherwise met minimum education and experience requirements for the type of property being appraised
- Regularly perform appraisals for compensation. This means appraisal work must be a consistent professional practice, and not a one-time or occasional occurrence.
- Have no financial interest related to the property or the outcome of the appraisal. They cannot be the donor, the taxpayer, a party to the transaction, or an employee of any of those parties
- Complete and sign the appraiser’s declaration on IRS Form 8283 for charitable contributions, certifying that they meet these requirements
What is a Qualified Appraisal?
A qualified appraiser must also produce what the IRS defines as a qualified appraisal – a report that meets specific content requirements, including:
- Completed no earlier than 60 days before the valuation date and no later than the due date of the return on which it is being used
- Signed and dated by the appraiser
- Detailed description of the property, including condition and relevant characteristics
- The effective date of the appraisal
- The valuation methodology used and the basis for the value conclusion
- The defined value being reported and the intended use of the appraisal
- The appraiser’s qualifications and credentials
The Role of USPAP
While USPAP (the Uniform Standards of Professional Appraisal Practice) is not explicitly mandated by the tax code for personal property appraisals, it is used by the IRS as a measure of the credibility and quality of an appraisal. Treasury Regulations require that a qualified appraisal be conducted in accordance with “generally accepted appraisal standards,” and USPAP is the recognized benchmark for what those standards look like in practice.
A USPAP compliant appraisal is transparent in its methodology, fully documented, and prepared by an appraiser who can stand behind every conclusion. For any appraisal with tax implications, that level of rigor is not a technicality, it is necessary. Learn more about USPAP here.
When Do You Need an IRS Qualified Appraiser?
The most common situations requiring a qualified appraisal prepared by a qualified appraiser for an IRS function include:
- Non-cash charitable contributions valued over $5,000
- Personal property included in a taxable estate for Form 706 filing
- For estate tax purposes, personal property with value totaling $3,000 or more must be appraised by a qualified appraiser, with the appraisal filed with the estate tax return (Treasury Regulation § 20.2031-6(b))
- Gift tax filings involving personal property valued above the annual exclusion threshold
- Casualty loss deductions for personal property damaged or destroyed in a federally declared disaster
If your situation involves any of these, confirming that your appraiser meets the IRS definition of a qualified appraiser is an important first step. These are not informal engagements, and they require rigorously prepared, fully substantiated reports that must meet specific regulatory requirements in order to hold up to the scrutiny of the IRS, courts, or any other reviewing party.
