A charitable house donation is a winning situation all around. A house donation will allow you to enjoy the peace of mind that comes with philanthropic giving and securing a meaningful tax donation while freeing yourself from a financially burdensome property holding.
Why Donate Real Estate?
One of the advantages to the donor is that the size of the tax deduction is determined by the current market value of the property, as opposed to the cost of the property when it was purchased.
In many cases, if one takes into consideration ongoing property taxes, maintenance costs, income taxes--or if the property is sold, the cost of legal fees, brokerage fees, estate taxes, inheritance taxes and capital gains taxes--it is often financially preferable to donate properties to charities. Sometimes there are intangible benefits as well.
Real Estate donations can provide you with highly beneficial tax results and allow you to achieve significant and important charitable goals that benefit those in need.
A donation of real estate to The Better Detroit Youth Movement can reduce your tax burden and provide you with the benefit of savings that comes from relief of the maintenance on your property. You can also avoid capital gains tax on highly appreciated properties with your charitable donation of real estate.
Who Should Donate?
These rules may apply if the donated real property is owned in your own name, with your spouse or other persons. (Please check with your tax professional):
If 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 various percentages 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 choose to deduct your cost basis of the donated property you are allowed a deduction of fifty percent (50.00%) of your adjusted gross
Income (Please check with your tax professional).
Excesses can be carried forward up to five years. Which method you choose to follow 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 (Please check with your tax professional).
The following rules apply if your charitable donation of real property is made by a corporation:
If you have held a controlling interest in the corporation and the property has been held for more than one year, the corporation may deduct up to ten percent (10.00%) of the net profit of the corporation (Please check with your tax professional).
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 corporation has elected "Sub.S" status, then the contribution allowed will be reported on the individual shareholders K1 and may be deducted on the individual return (Please check with your tax professional).
Partnerships, S-Corporations and Limited Liability Companies:
The following rules may apply if your contribution is being made by a partnership, S-Corporation or Limited Liability Company:
The corporation may not claim a deduction for the property donated. Rather, the contribution passes to the individual shareholders on a prorated based on their percent 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 (Please check with your tax professional).
Partnerships and Limited Liability Company contribution rules are the same as S-Corporation with one exception, the partners or members can claim a deduction even if they have no basis in the partnership or Limited Liability Company. Please check with your tax professional.
Commercial Property Donation - Donate Commercial Real Estate:
Donate commercial property and improve performance! Commercial property, whether held by a commercial entity, a company or business, or a private individual-should be an asset. Far too often, however, commercial property becomes more of a liability and a financial drain. In cases such as this, the situation can be turned on its head: donate commercial property that is not performing and enjoy a number of financial benefits.
ABOUT THE CHARITY:
The Better Detroit Youth Movement is a non-profit coalition of positive-minded individuals and groups who are committed to working together with communities, parents, schools and students to improve the quality of life and learning for our city’s children.
Learn more at: http://www.betterdetroityouth.org
P.O. Box 66404
Roseville MI 48066