You may be aware that charities accept cash and even automobile donations, but did you know many charities will accept your real estate donation too? As market conditions continue to confound home sellers, many are looking for alternate ways of disposing of their homes. Donating your real estate can be a way for you to free yourself of a property you no longer have use for, help a charity, and possibly receive tax benefits in return.
Donating real property is not a new phenomenon. People have been donating real estate to reduce their taxes liabilities for many years. Depending on how your donation is structured, you could receive tax benefits now or possibly in the future (to reduce estate taxes). In a sluggish and unresponsive market, donating homes may become a more popular solution for frustrated home owners and cash strapped charities.
Although most real estate donations come in the form of non-owner occupant homes (such as vacation home, second home, or investment property), some charities will accept farms, vacant lots, “double wides” and even commercial property. Although you may have to own the home outright for an immediate donation, some charities have mechanisms to accept real estate donations through wills and living trusts.
Of course, the tax and financial implications of such a donation would require you to consult with your accountant, CPA, and/or attorney to determine if this is a viable option. The IRS has specific guidelines on real property donations; the tax law describes what types of donations qualify for tax deductions as well as describing what charitable entities are eligible to provide tax deductions for your property donation. Maryland and local tax laws will also impact your donation decision; Maryland has specific laws guiding charities and contributions, while local and State transfer taxes can have an influence on your donation.
Once you determine this is a practical option for you, consider consulting with the Maryland Office of the Attorney General (www.oag.state.md.us/nonprofits/index.htm) and the Maryland Office of the Secretary Of State Charitable Organization Division (www.sos.state.md.us/Charity/Givewise.htm) for information on charities and charitable giving. The respective offices (and websites) provide information about requirements for charities as well as consumer information including donor’s rights and “how to spot deceptive practices.”
Although not all charities accept real estate donations, many do. Giving charity is a personal endeavor, as you would likely support organizations which represent your ideals and morals. You can verify and receive information about specific charities and non-profit organizations from the Maryland State Charitable Organization Division (listed above).
What does the charity do with your property after they receive your gift? It depends on the type of property; however, some charities seek to convert homes into group homes for the disabled or the less fortunate and homeless, while other charities anticipate liquidating real estate gifts to obtain cash to support their organizations.
In this season of giving, real estate donations can be a way to give back to the community as well as the organizations that have impacted your life. However, before you decide to give, please consult with your accountant and attorney to determine if this is appropriate for you and to verify that your charity meets the requirements to accept such gifts as well as providing tax deductions.
This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 24, 2008. Copyright © 2008 Dan Krell.