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Tax Benefits of Donating Real Estate to Charity

Why Is Donating Real Estate To Charity A Good Way To Be Rid Of Unwanted Property?

 

Copyright © 2008 Ralph Marcus Maupin, Jr. (Mark)

 

Donating real estate to charity is not just for the rich. In fact it’s especially a good idea for people whose property is a financial burden. I have worked with individuals, charities, and small corporations for years with the donations process. For many people and companies, donating is a good way to get rid of unwanted property because of property taxes, insurance costs, liability exposure, etc.

Different rules apply for real estate donation depending on who is making the donation. If the donated property is owned in your own name, with your spouse or other persons, and you have held the property for more than one year, it is classified as long-term capital gain property. You can deduct the full fair market value of the donated property. Your charitable contribution deduction is limited to thirty percent (30.00%) of your adjusted gross income. Excess contribution value may be carried forward for up to five years.

 

If the property has been depreciated, the fair market value must be reduced by its accumulated depreciation through the date of contribution. Fair market value is most commonly determined by an independent appraisal. If you elect to deduct your cost basis of the donated property you are allowed a deduction of fifty percent (50.00%) of your adjusted gross income. Excesses here again can be carried forward up to five years. Which method you elect is dependent on the cost basis in the property donated, your tax bracket, the age and health of the donor and whether you plan to make future contributions.


If a corporation is donating property they’ve held more than one year it can deduct up to ten percent (10.00%) of the net profit of the corporation. Excess contribution amounts can be carried forward up to five years. The fair market value here must be reduced by the amount of accumulate depreciation. If the corporate has elected "Subchapter S" status, then the contribution allowed will be reported on the individual shareholders K1 and may be deducted on the individual return.

If a partnership, S-Corporation or Limited Liability Company is making the contribution it may not claim a deduction for the property donated. Instead, the contribution passes to the individual shareholders on a proration based on their percentage of ownership in the S corporation. The shareholder can claim this deduction on their individual tax return. The same limits and carry forward rules will apply. Partnerships and limited liability company contribution rules are the same as an S corporation with one exception the partners or member can claim a deduction even if they have no basis in the partnership or limited liability company.

Real estate investing by nature is risky. You can win, lose, or break even. We cannot guarantee a profit or loss. We do not provide legal, accounting, or contracting advice.

* Please consult your CPA/Attorney for your specific tax benefit.

Mark Maupin has purchased and sold over 3,500 single-family homes and many multi family properties. Ralph Marcus Maupin, Jr. Nick Name ‘Mark’ is one of founders of National Real Estate Network LLC. He teaches real estate investing and Internet Marketing for a local Michigan College. You will find many free resources such as: Free Real Estate Forms, Terms, Articles and Real Estate Investor Clubs Locations at: http://MegaEveningEvent.com. For low cost Michigan Real Estate Investing CDs, DVDs, forms and E-books go to http://stores.ebay.com/Real-Estate-Investing-Guide

 

 
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