What is depreciated real estate?

Depreciated real estate is property that is in distressed, vacant or abandoned condition. Often when a property has been left abandoned in Chicago, that property succumbs to the environmental elements including the extreme weather conditions. Many people don’t realize that depreciated property can be donated. But unless you plan on rehabbing depreciated real estate, your best financial option is to donate depreciated real estate to a charity. This will relieve the burden of owning the property, help a charity, and allow you to take a tax deduction without paying capital gains taxes.

Is there a cost to me to donate depreciated real estate to a charity?

You do not need to pay closing or recording fees when donating depreciated real estate to a charity. However, to receive a tax deduction you do need to pay for a current appraisal of the property. The reason for this is that the recipient of a real estate donation cannot pay for the appraisal, nor can they recommend, an appraiser.

What can a charity do with my depreciated real estate donation?

Donating to a charitable organization means that all proceeds from your donation will go toward the goals of the charity. A nonprofit organization may use your real estate for their charitable use or fundraise by selling the depreciated property.

Can I avoid capital gains taxes if I donate real estate to a charity?

Yes, you can avoid capital gains taxes by donating depreciated real estate to a charity. Capital gains taxes are taxes on the profit from the sale of a large asset. Since you are donating real estate to a tax-exempt organization you do not have to pay capital gains taxes. The benefit is two-fold as you can receive a tax deduction based on the appraisal value of your donated property.

Is there a difference between a nonprofit, a charity, and a 501c3 organization?

501c3 is the tax code for tax-exempt nonprofit organizations. The two terms are often use interchangeably. A charity is one category of the nonprofit status. A charity is a type of nonprofit that engages in activities aimed at improving the lives in a community. While a charity is a nonprofit, there are three categories of nonprofit. Those categories include public charity, private foundation, and private operating foundation.

How long does the donation process take?

The donation process with the Urban Renewal Project is quick and easy. For most charitable real estate donations, the process will take 3-6 weeks. This is under the assumption that paperwork is available and in order and the title is clear of any issues. If there delays in paperwork or the title is missing, it may take longer.

Why wouldn’t I just sell depreciated property and donate the proceeds to charity?

By selling a piece of property you will be required to pay capital gains taxes on the profit from that property. Often, the money that you make from selling property will mean that the charity will receive less money for the property than if you just donated the depreciated real estate to the charity directly.

Are you ready to donate depreciated real estate to a charity?

If you are interested in donating a house, rental property, or commercial real estate to a church, contact the Urban Renewal Project. We’d like to help you give back to the community in such a heartfelt way.