Donating Real Estate for Charity and Tax Breaks

Posted by Professional Realty on Monday, February 17th, 2014 at 7:25am.    1676 Views

Real Estate Charity Strategy Tax Breaks?

Donating Real Estate to Charity for Tax Breaks.Sometimes an investor or owner is going to end up with a multi family or commercial property that they just can't sell for reasonable market price. Now, they can hang onto said property and rent or lease, enjoy some viable tax deductions and hopefully positive cash-flow. But what if you really need to unload the real estate in question?

Donating Undesirable Real Estate

An often used and popular strategy owners of such property is giving it to a charity in order to take a charity deduction on their taxes. The investor should understand, if the given property’s valuation for tax purposes is high enough, the property owner can come out way ahead in some cases, or at least land somewhere close to breaking even if the investor is trying to cut their losses. However, the IRS is well aware of this strategy. The Internal Revenue Service has implemented a good number of rules in place designed to prevent unrealistically high and inflated  valuations of dilapidated property for charity and tax purposes, don't land outside these rules or you could lose your entire deduction. 

If you're donating real estate to charity, its value for tax purposes is “fair market value” at the time of the donation. "This is the amount that a “willing buyer would pay and a willing seller would accept for the property, when neither party is compelled to buy or sell, and both parties have reasonable knowledge of the relevant facts."

Realistic, Timely and Professional Real Estate Appraisals

A sound step and wise policy to consider if you're going to unload an undesirable property on a charity in hopes of worthwhile tax breaks is making sure you obtain a current, timely and professional appraisal. Appraisals that are ten years old, or, appraisals of what the real estate could be worth after rehabilitation, renovation or cosmetic improvements are outside the IRS's consideration when it comes to the rules. 

1 Response to "Donating Real Estate for Charity and Tax Breaks"

Daniel H wrote: nail on the head there greg, i should know. I tried to move a multi family with 8 units and 3 needing hefty fixing, along with ancient boiler, furnace and every window decades old glazed windows falling out. A friend advised me to gift it to charity and show a good value and price after rehab... IRS denied it, and found out later, I should have been reasonable or low ball in it's valuation, used an appraiser and at best break even or better, or at worst a little lost... you can't imagine the hoops i've been going through now trying to unload this place. can you help?

Posted on Thursday, February 27th, 2014 at 9:27pm.

Leave a Comment