Cutting back? You may find cash in your closet

updated 4:51 p.m. ET May 28, 2009

NEW YORK - When credit was flowing, stock portfolios were rising and jobs were plentiful, Americans bought and bought, stuffing their closets with everything from designer shoes to coats.

Now, worried shoppers are looking to their closets — including many items inside that still have price tags attached — as a means to raise cash to help them get by.

"People are coming up with creative ways to turn all that stuff into money," said Lisa Lee Freeman, editor-in-chief of ShopSmart, which is published by Consumer Reports.

Here are ways to make your closets work for you:

1. SELL TO CONSIGNMENT SHOPS: If you have a bunch of status brand clothes in pristine condition, consider taking them to a consignment shop, which typically will pay you 50 percent of what it can resell them for, according to Freeman. Check with the trade group the National Association of Resale & Thrift Shops, at NARTS.org, for shops in your area and tips on how they operate. Make sure to visit to learn what they're looking for and which shop will give you the best price. Dry cleaning your offerings will help boost your return.

But remember that consignment shops pay you only when they sell an item — and that amount will go down the longer an item sits on a rack. Freeman advises setting a minimum selling price because it can be more worthwhile to donate some things to charity and take a tax deduction.

2. SELL ON CRAIGSLIST OR EBAY: Sites like craigslist.com or eBay.com make it easy to get rid of castoffs because they draw buyers hunting for secondhand items. Michael Londrigan, chairman of the fashion merchandising department at the Laboratory Institute of Merchandising in Manhattan, recommends posting photos of your offerings on the Web. He estimates you can get anywhere from 30 percent to 50 percent of what you paid at retail.

3. SWAP WITH STRANGERS: Consumers have long traded clothing, but the Internet has nurtured bigger and more organized swaps bars, garages and churches. Usually you get to take away up to the same number of items you bring, and cash is not involved. Web sites like meetup.com, which helps users organize groups of people who share interests, also spawn clothing swaps. Meetup has 13 within 25 miles of Manhattan.

4. HOLD A YARD SALE: There's always the traditional yard sale or garage sale, but be sure to list yours on garagesalehunter.com or another forum that offers localized listings. And be prepared to deal with hagglers face to face.

5. TAKE A TAX DEDUCTION: Consumers can reap hundreds of dollars in tax savings if they donate clothing — in good condition — to tax-exempt organizations. The Internal Revenue Service allows taxpayers to deduct the fair market value of clothing or household goods and recommends claiming values that are what buyers actually pay in resale shops.

For details on the IRS guidelines for apparel, refer to IRS Publication 526-Charitable Contributions at  and IRS Publication 561, Determining the Value of Donated Property.

Salvation Army has a valuation guide to assist shoppers here.

The IRS requires a professional appraisal for donation of any single item worth more than $5,000. And for donations worth more than $500 taxpayers must document the method of establishing fair value and file a Form 8283 Noncash Charitable Contributions.

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