Donating Real Estate
The majority of taxpayer’s do not have a large real estate portfolio that they are looking to unload but many have a second home or maybe a home they inherited after the death of a loved one. There are many costs that go into owning real estate…property taxes, maintenance costs, and income taxes and then if the property is sold…legal fees, brokerage fees, not mention capital gains tax, inheritance tax, and estate tax. These costs and the headache of keeping up with it all may make simply donating the property the better choice. The taxpayer gains a tax deduction while helping out the community as well. In order to donate Real Estate, the taxpayer will need an appraisal and in some cases, the appraisal will need to be attached to Form 8283 and submitted with the tax return.
The following terms and limitations apply:
• All expenses related to the donation are the responsibility of the donor in most cases. • The property should be long-term (held for at least 1 year).
• The donation value is FMV up to 30% of the taxpayer’s AGI or cost basis up to 50% of the taxpayer’s AGI.
• Total donations exceeding the taxpayer’s limit are carried over for up to 5 years.
• If the donated property has been depreciated, the donation is reduced by the amount of depreciation that would be recaptured as ordinary income if the property were sold.
• Different limits apply to Corporate and Partnership donors.
For additional support:
Deconstruction of Real Estate Another option available to taxpayer’s as a donation is a deconstruction. I am sure you have noticed all around us in our area of the Heights, home is being demolished and rebuilt. Rather than totally knocking down a house and receiving no tax benefit, a taxpayer can bring in a trained deconstruction crew and salvage many reusable items such as doors, windows, cabinets, lighting, lumber, and flooring to name a few. This option allows the taxpayer to receive a deduction and keeps these reusable materials out of our landfills. In order to donate via Deconstruction, the taxpayer will need a qualified appraiser to value the materials in the home and assess a value. If you choose to move forward with deconstruction rather than demolition a Deconstruction Contractor will need to prepare a bid for Deconstruction. A donation letter should be submitted to the receiving organization which can provide the taxpayer with a receipt for their donation. Form 8283 is completed.
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Other Factors to Consider Regardless of which donation choice is chosen by the taxpayer, it is important to take into consideration that based on AGI, the taxpayer’s Itemized Deductions could be greatly limited and while Charitable Donations are not a preference item for AMT, the taxpayer would receive a higher deduction if larger donations were to be put off to a tax year where the taxpayer is not subject to AMT.
For additional support on Itemized Deduction limitations:
For additional support on how AMT affects charitable giving: