Donating real estate can be confusing.
There are many laws, tax questions and general confusion around this process.
The process is actually very simple for the donor but the lingo, numbers and documents can make things confusing.
We complied a list to help you strategize your donation to work for you.
How to Build Your Strategy
- Remember that your donation should be submitted before Dec. 31st to receive the tax benefit for that year.
- Make sure that you donate the property and not the cash value after the property has been sold. Otherwise you will need to pay capital gains tax.
- Know that you can break up your tax deduction for more than 1 year. This is an available option if your write off is more than your incomes allowance or if you choose not to claim the donation in the year it was made in.
- What type of donation are you giving? There are different ways to gift real estate such as:
- Outright gift
- Bargain sales
- Planned giving charitable remainder trust (CRT)
- Charitable gift annuity (CGA)
- Retained life estate
- Answer these questions:
- How much have I invested in this property?
- What’s the most I can sell it for?
- What’s the least I can sell it for?
- What type of property am I donating?
- Which non-profit am I donating it to? It’s important that you make a contribution to a valid 501(c)(3) Charity.
- What tax bracket am I in?
We recommend to make your strategy together with a qualified professional with an emphasis on the next 3 points:
- Based on above points, determine your eligibility.
- Determine the value of the property.
- Document checklist:
- Receipt from charity
- Section A of the Form 8283 completed and signed by the client.
- If the donated real estate is worth more than $5,000 than you need:
- Section B of the Form 8283
- An appraisal of the property value attached.