Tax deductions for real estate donations

This guide will teach you everything you need to know to donate your real estate and get a tax deduction.
Find out about whether you are eligible for a tax deduction, what type of donation is right for you and how the valuation process works.

Tax deductions for real estate donations

This guide will teach you everything you need to know to donate your real estate and get a tax deduction.

Find out about whether you are eligible for a tax deduction, what type of donation is right for you and how the valuation process works.

Getting started

Donating real estate can be confusing.

Taxes are even more confusing.

There are many laws 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 compiled a list to help you strategize your donation to work for your tax deduction.

Remember that any point that’s confusing could be answered by calling 1 855 753 2099 or message.

Table of contents

Can donated real estate
be tax exempt?

It’s a bit complicated but in general, yes, your donation will be tax-exempt.

Complications arise from the different ways real estate can be donated.

The process is easy for the donor but a reputable party should be involved to make things right for you.

The IRS states“The federal tax code allows individuals and businesses to make noncash contributions to qualifying charities and to claim deductions for these contributions on their tax returns.”

There are however rules and regulations that need to be accounted for.

The main factors to be tax-exempt:

Who you can donate your real estate to:

Value of the property

If the property is more than $5,000 then you need a qualified appraisal. If the appraisal is not qualified then you may not be tax-exempt from donating your property.

The donation must be of the property itself

Not of the cash value received from selling the property.

If cash was received and then the donation is made with the proceeds (and not the property) then that cash value is subject to a capital gains tax.

A charitable receipt from one of the qualified organizations listed above is not considered as a “cash donation” after the property was sold.

What part of the real estate will you be donating?

The use of the property, the whole property, half of the property, will the property still reap the reward for you? etc…

These are also key factors in you being tax-exempt.

More information can be found on publication 561 in the IRS website.

In most cases, not only will your donation be tax-exempt but you will also benefit from a tax deduction.

To sum things up, the process is easy for the donor but the receiving end must be a qualified organization that can accept the donated property.

Our charity can help you donate real estate fast, free, and with zero headaches for you.

Am I eligible for a tax write-off when I donate my
real estate to charity?

Checking whether your real estate donation is eligible for a tax deduction is a mandatory step before moving forward in the donation process.

For a real estate donation to be eligible for a tax deduction, it must be made solely for charitable or public purposes by an individual who will itemize deduction. 

What does it mean to itemize deduction for real estate donors?

This is the value that you will claim against the value of your donation.

This value will allow you to pay less on your adjusted gross income (AGI) which will downsize the tax you owe to the IRS.

Your donation must also be made to an organization that has a 501(c)(3) designation from the IRS

It’s one of the dozens of different 501c nonprofit types in the US.

For a charity to have a 501c3 status it must fall under one of the following categories:

  • Religious
  • Scientific
  • Educational
  • Testing public safety
  • Sports (limited to certain criteria)
  • Social work (child, women or animal abuse)
  • Community funds
  • An organization that’s made to cooperate or associate exclusively to support the above

This type of organization provides a federal income tax deduction.

Read more about 5013c organizations here.

Make sure to not fall into the trap of thinking that every donation is tax-deductible.

Only a charity with a 501c3 status could grant you a tax-deductible receipt.

Even a legitimate charity without this status cannot provide you with a tax deduction.

A database of tax-exempt organizations has been set up here to help you with your research.

Real estate donation SCAMS

Beware of charity scams.

There are organizations out there that pretend to be charities but they are not legal.

How to avoid being scammed

  • In order to protect yourself, you need to find out if the charity is legit.
  • You can do that through the state consumer protection or the better business bureau.
  • Make sure to find out the legal name of the charity.
  • Watch out for fake charities using very similar names to disguise as the one you are looking for.
  • If anyone is trying to pressure you into a deal, don’t let them.
  • Avoid paying with cash.
  • Always try to use checks or a credit card.

More points to consider for a real estate donation tax-writeoff

  • Consult with the appropriate charity, accountant, or someone who could provide professional advice
  • You need to fill out the 8283 form (if the value of your donated property is over $5,000 then you will also need a professional appraisal attached to your tax return) – more info about the forms that need to be filled out will be discussed below.
  • Make sure to find out how much you will be able to deduct, whether you want the deduction at once or spread out and what’s the highest and lowest amount your property would be worth on the market

TIP

Always make sure to keep a record of your charitable donations, large or small as they may add up

Tax benefits of donating real estate to charity

Donating property carries with it many personal, tax, and financial benefits.

Avoid capital gains tax

This is a tax you have to pay for any income.

You would have to pay this tax by selling the property.

Receive tax-deductions

You will receive the full value of your property in tax returns. 

You can carry these returns over for 5 years.

Avoid any current tax responsibilities

  • Property tax
  • Maintenence

Charities handle the whole process for you for free

We help educate you and your accountant while helping with all necessary documentation and filing.

Tax benefits of donating VS selling AND THEN donating (proceeds):

When you sell

 You will have to pay taxes on the “cash” earned.

When you donate

Tax return and no taxes are paid. 

Different ways of donating that affect your tax return

After determining your eligibility, you must then decide what type of donation makes the most sense for your situation. 

Each one of these ways to donate affect your tax deduction.

Outright Gift

The deed or title is transferred from you to the charity to which you donate. You will then receive a tax deduction equal to the fair market value of the property and that deduction may be carried forward for up to five years.

Bargain Sales

If you sell your property for less than its fair market value to a charity, then the difference between the fair market value and the sale price is considered a donation. 

Planned Giving Charitable Remainder Trust (CRT)

As with other types of financial trusts, a CRT contains property assets where a portion of the trust’s value is distributed each year to one or more beneficiaries for a term of years or for life. At the end of the term, the remaining CRT assets are distributed to the charity.

Charitable Gift Annuity (CGA)​

A CGA allows you to make a contribution and, in return, receive fixed annual payments for life from the charity. A CGA also allows you to claim a partial income tax deduction for the year of the contribution.

Retained Life Estate ​

This allows you to transfer the ownership of your property to a charity, receiving a tax deduction based upon your and your spouse’s age and the value of the property, while retaining the right to use the property for life.

Donated property valuation
for tax purposes

If the deduction claimed is $5,000 + you need a qualified appraisal.

This appraisal could be made through a qualified organization.

What is the appraisal?

The appraisal is the fair market value (the price the property would sell for).

If there is a part/function of the property that you don’t want to donate, the price would have to be determined without that part/function of the property.

Estimated Value of Donated Property Guidelines

This is the cost or adjusted basis in the donated property.

How is it calculated?

  • The cost and selling price of your real estate (this can change and affect the value)
  • What did properties like yours sell for
    • How similar were the properties?
    • Was the sale close to the valuation time?
    • What were the circumstances of the sale?
    • What were the conditions of the market at that time (too inflated or deflated)?
  • The cost of replacement
  • Opinions of experts
  • What were the terms of the purchase/sale

It’s important to note that there is no fixed rule for getting fair market value.

Especially for real estate.

There are no magic formulas to generate this value easily.

The person doing the appraisal must be well versed in the principles and theory of determining the right value.

The report needs to have the full picture (description, measures, legal, location, condition, etc…). Usage now, potential usage, permits, restrictions, etc…

Source – IRS Publication 561 – Determining The Value of Donated Property

How much will my tax deduction for donated real estate be

This will depend on a few factors.

Is it a short-term asset?

Held less than 1 year.

short-term assets qualify for a deduction equivalent to the lesser of the property’s fair market value or its cost basis.

Is it a long-term asset?

Held more than 1 year.

Long-term assets qualify for a deduction based on the fair market value of the property or donors can elect to leverage the cost basis rather than the FMV of the property. 

Tax deduction table

real estate donation tax deduction table
Click to view full size image

Tax deduction calculator for donated properties

Final note - How to steps and checklist for getting the most out of your tax deduction

The IRS is STRICT.

There are so many times where a person fills everything out, everything looks GUCCI, and then BOOM.

He got way less than he expected.

There are a ton of nuances and bureaucracy (which no one likes).

With the impatience to get things done and not have to deal with so much, oftentimes, you can really lose out.

Get yourself a good tax advisor or contact a charity that accepts real estate like us.

How Accurate Should I Be When Donating Real Estate?

VERY.

If you care about your return…

For example, if you valued the property at less than what it’s worth. You lost.

If you are overpriced…You will pay taxes and not just taxes.

Penalties too.

Steps to take to donate your property

  • Tell us about your property – Either call us at 1 855 753 2099 Or fill out our easy donor application form here
  • Our expert team reviews each property to see if it’s a good fit.
  • Sign the closing documents and return them to us.
  • Leave the rest to us as we take over all other property responsibilities, sending you a tax-deductible receipt.

IRS Rules For Donating Real Estate and claiming your tax break

What The IRS Wants to Know For Your Donated Real Estate to Get a Tax Deduction

  • Name
  • Address
  • I.D. number of the taxpayer
  • Info about the qualified appraiser
  • A statement that the appraisal was for tax write off purposes
  • And more…

Tax return checklist

  • Based on the above points, determine your eligibility. 
  • Determine the value of the property.
  • Document checklist:
    • Receipt from charity
    • Section A of Form 8283 was completed and signed by the client.
    • If the donated real estate is worth more than $5,000 then you need:
      • Section B of the Form 8283
      • An appraisal of the property value is attached.

Frequently asked questions

After donating my real estate, when do I get a tax deduction?

Once you’ve made the donation, you will receive a receipt from the charity to include in your tax returns for the year. If your property is over $5000, you will also need to include a formal appraisal. By donating, we make sure that the process is as hands-free for you as possible. Contact us for more information.

Which type of donation should I choose to maximize my tax deduction?

This depends on factors such as: your property’s fair market value and cost basis, optimal tax deduction, and your general financial situation. Contact us for further assistance.

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