Davidson Law Group on Charitable Planning: Donating Real Estate to Charity

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What You Should Know About Donating Real Estate to Charity

Generosity and charitable giving can include monetary donations to friends, family, strangers, or even non-profit organizations. It can also include donating land or real estate. Charitable giving has benefits like the gratification of helping your community, but it’s also important to understand that it has many tax, business, and financial benefits. In today’s blog, the estate attorneys at Davidson Law Group talk about charitable planning and what to expect if you donate appreciated real estate to charity.

The Benefits of Donating Appreciated Real Estate

One of the most significant benefits of donating appreciated real estate is that your donations will qualify for an income tax deduction that equals the fair market value of the property. The amount of the deduction depends on whether the real estate is a short-term asset or a long-term asset.

  • The deduction for short-term assets, or assets held for one year or less, is equal to the secondary of the property’s fair market value.
  • The deduction for long-term assets, or assets held for more than one year, is equal to the property’s fair market value and is limited to 30 percent of the donor’s adjusted gross income.

By donating property rather than selling, you can also avoid capital gains taxes. Capital gains on long-term assets are taxed up to 23.8% depending on your income, resulting in a tax bill that can be quite substantial.

How You Can Donate Real Estate

Direct Gift

A direct gift is the simplest way to donate real estate and involves directly transferring the deed or title from the donor to the charity.

Charitable Remainder Trust (CRUT)

Donors with highly appreciated property often use a CRUT if they wish to accomplish philanthropic goals and preserve their income at the same time. This trust is tax exempt, and all proceeds can be reinvested. There are many considerations when contributing to a CRUT, like distribution to beneficiaries, what happens to the remaining assets, and charitable deductions.

Bargain Sale

A bargain sale is when the donor sells the property to a charity for less than the property’s fair market value, and the donor is taxed on their gain. The donor may also claim a tax deduction equal to the difference between the property’s fair market value and its selling price.

What to Be Aware Of

If you are considering donating real estate, there are many things to discuss with tax professionals or estate attorneys. These things include charitable substantiation requirements, the possibility of a prearranged sale, depreciation of the property, and if the property is under a mortgage.

Charitable Planning with Davidson Law Group

If you are considering donating your real estate or want to learn more about what it can do for you, the estate planning attorneys at Davidson Law Group can help by offering charitable planning services. Contact our offices in Fort Worth, Allen, or Tyler or visit our website for more information about how we can help with charitable planning.