It's not something you hear about very often, but many charities and non-profit organizations accept homes or other real estate as donations. This can provide you with significant tax benefits, a rewarding philanthropic experience, and help improve the neighborhood. While not many people have spare real estate, there are more options to such a donation than you may think. If you’re getting a new house made by new home builders in Utah and want to donate your own house, here are five things you should know.
You can donate property in the way that works best for you. You could donate it to a charity of your choosing in your will, which means you get to stay in your home until your final days. If you have a second home, you could set up a charitable trust so that the organization purchases the home at a low rate, but you receive back any remaining funds from the sale, minus the trustee fees, paid out over a specific period. This allows you to avoid the capital gains tax you'd pay from an outright sale, and allows your heirs to escape any inheritance tax if the property is left to them.
If you hold the title to a property you don't use, or can't afford to maintain or pay taxes on, it could free you from an unpleasant obligation. Real estate that's highly depreciated or uninsured may not be economical to repair. The large IRS deduction from a property sale could be a very attractive incentive by itself. Property companies of all kinds such as new home builders in Utah or housing developments in Florida may find themselves with real estate that's no longer producing positive cash flow. Donating it could be the most economical alternative.
It's important to understand the value of the property you wish to donate. Any tax deductions will be based on the fair market value, not the original purchase price or insurance amount. For properties that have been in your possession for many years and are reasonably well maintained, this could result in a tax exemption well beyond your initial investment. For properties that are dilapidated, it could be worth some repair work to raise the market value and recoup the cost in your tax savings.
Apart from value, you have to consider the nature of the property and the requirements of the charity. Some charities may accept land, commercial property, or homesteads. Others may accept only residential houses, or in a certain satisfactory condition to avoid their own expenses. There may also be issues such as existing liens, code violations, or unpaid taxes that come into play. Get assurances that the non-profit will accept your property, and if there are any legal problems, you may need an attorney to get them resolved.
Although laws vary from state to state, as do charity agreements, it's rare for a non-profit organization to share the costs in the transfer of deeds and titles. You may also have to come up with documentation on title insurance, soil or termite tests, property insurance, home inspections, probates, outstanding bills, zoning, and other potential problems. Many charities consider this on a case-by-case basis, or may retain their own lawyer. But all such costs are normally the responsibility of the donor.
If you have a second home, vacation home, or undeveloped acreage that's costing more than it's worth to you, donating it is an excellent alternative. You could be looking at not only future savings on maintenance, insurance, and property taxes, but potentially huge benefits the next time you have to file taxes.
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