Tax Benefits of Donating Real Estate
Real estate donations offer a number of tax benefits for property owners, including the ability to claim a tax deduction for the fair market value of the property, avoid capital gains taxes, and reducing estate taxes.
IRS Tax Deductions and Real Property Donations
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The United States Internal Revenue Service (IRS) offers a number of tax benefits to individuals who donate real estate property to eligible charities and non-profit organizations. Real estate donations are a valuable way to support a cause you believe in, as well as potentially lower your tax bill. This article will explore the specific tax benefits of real estate donations in the USA, and provide a guide for those interested in donating property.
One of the primary benefits of real estate donations is the ability to claim a tax deduction for the fair market value of the property. The fair market value of a property is the amount it would sell for on the open market, taking into consideration its location, condition, and other relevant factors. The tax deduction for real estate donations is limited to 30% of an individual’s adjusted gross income in the year of the donation, with a five-year carryover period for any unused portion.
Another benefit of real estate donations is the avoidance of capital gains taxes. When a person sells a property, they are required to pay capital gains taxes on the difference between the sale price and their tax basis (usually the purchase price). However, when a property is donated to our charity, there is no need to pay these capital gains taxes. This can result in substantial tax savings for individuals who have held onto a property for many years and seen its value increase significantly.
Real estate donations can also provide estate tax benefits for individuals who are concerned about the transfer of their wealth to future generations. Estate taxes are imposed on the transfer of wealth from one person to another, and they can significantly reduce the amount of wealth that is passed down. However, real estate donations can help reduce estate taxes by removing the value of the donated property from the estate, thus reducing the size of the taxable estate.
In addition to the tax benefits, real estate donations also provide a sense of fulfillment and satisfaction for those who donate. Many individuals find that giving back to their community through real estate donations is a meaningful way to make a positive impact, and it can also help to establish a legacy that will continue to make a difference for years to come.
When considering a real estate donation, it is important to choose a qualified charity or non-profit organization that aligns with your values and mission. You can view some of the ways we help others by viewing our worthy causes page.
To make a real estate donation, an individual must first have clear title to the property, meaning that they are the sole owner and there are no liens or other encumbrances on the property. The next step is to determine the fair market value of the property, which can be done through a professional appraisal. Once the fair market value has been determined, the individual should work with our non-profit charity to execute a transfer of ownership.
Finally, individuals must document the donation and keep accurate records to support their tax deduction. This includes obtaining a receipt from our non-profit organization, as well as obtaining a written appraisal from a professional appraiser. It is also important to keep a record of any expenses associated with the donation, such as appraisal fees or legal fees. *In most cases we usually take care of all fees.
In conclusion, real estate donations offer a number of tax benefits for individuals in the United States, including the ability to claim a tax deduction for the fair market value of the property, avoid capital gains taxes, and reduce estate taxes. To take advantage of these benefits, individuals should choose our qualified non-profit organization, determine the fair market value of their property, execute a transfer of ownership, and document the donation. With careful planning and the support of a professional team, real estate donations can be a great way to help others and yourself.