Questions to Ask Yourself when Donating Real Estate to a Charity.
There are important questions to ask yourself when donating real estate to a charity, and before providing useful information we feel it’s important for you to know if you don’t already:
- We understand and respect the concerns of individuals donating real estate to a charity, which is why we can put you at ease on our first phone call.
- When it comes to donating real estate to a charity, we provide what most nonprofits can’t, which are highly qualified, experienced professionals to manage the donation process from start to finish, at no cost to the donor, or charitable organization.
- You can trust that we have made sure your donation will go to a qualified 501(c)(3) charity.
We hope the following will help inform you of the good done by donating real estate to a charity.
First, answers are for informational purposes only and should not be considered legal or tax advice. You should contact an attorney or tax professional
Benefits of donating real estate to a charity.
Donating property comes with several benefits. I think I can speak for everyone at Urban Renewal Project when I say the greatest benefit to donating real estate is the warm feeling of doing something good for our great city. Nonprofit organizations can use donated houses and donated commercial property to grow and improve the neighborhoods and communities they work in.
In addition to positively impacting others, donating real estate has tax advantages. For example, a property owner donating real estate does not have to pay Capital Gains Taxes. In addition to avoiding Capital Gains Taxes, you can also write off the charitable donation on your taxes.
While there are other financial and altruistic benefits to charity property donation, those are the most common benefits.
Questions to ask yourself before donating real estate to a charity:
How will the charity use the donated property?
The reason why this is important to your financial advisor is purely based on the amount of your charitable donation. For example, if a charity is selling your property to use the money to fund the charity, then you can write-off the adjusted basis of your property – often the purchase price. However, you can get the full deduction of the fair market value if the nonprofit uses your property to further its mission.
Has the property’s value changed since you acquired it?
When you donate money to a 501c3 nonprofit organization, the maximum tax deduction is the lesser of the fair market value and your adjusted basis. So, if your property has depreciated since purchasing it, you can only get a tax deduction for the current market value. This is one of the reasons why people who own distressed property in Chicago donate property. There is more of an advantage in donating the property than paying taxes and upkeep on a property that may depreciate further.
How long have you owned the property?
This is an interesting nuance to your taxes, and one day matters. If your property is a capital asset such as an investment property, the length of time you’ve owned the property affects your tax deduction.
If you have owned the donated real estate for less than a year, you are subject to ordinary income taxes if you were to sell it. As such the amount you can deduct is limited to your adjusted basis. However, if you hold the property donation for one year and one day, the real estate is considered a long-term capital asset. When donated, the full fair market value of your property can be deducted.
What is your income?
Individuals are able to donate up to 50% of their contribution base, which for most people is your adjusted gross income. By donating a valuable item such as a single-family home or a rental property you may not receive the full deduction do to the value of the donated property.
So, before donating property, determine the value of your charitable donation. If the donation is near 20% of your adjusted gross income you should reach out to your financial advisor or tax advisor. This will help you determine if you will receive the full tax deduction for donated real estate.
Donating real estate to a charity is a great way to help improve Chicago and the lives of those around you. Whether you love giving or want to receive tax benefits from charitable donations, donating real estate to a charity is a win-win solution for you and the nonprofit you donate real estate to.
Contact the Urban Renewal Project to Donate Real Estate to a Charity.
If you are interested in donating a house, rental property, or commercial real estate to a charity, contact the Urban Renewal Project, we’d like to help you to donate to a worthy cause in a heartfelt way.