5 Steps To A Charitable House Donation

For some, donating a home is the ultimate act when it comes to charitable giving.  is a single action that can enhance the lives of whole families, possibly creating ripples for generations yet unborn. If you find yourself thinking about making such a significant donation, it is important to do your homework.

The benefits of donating your house

Donating your house comes with a lot of benefits not only to the charity of your choice but to you as well. Here are important things to consider:

  • Get a major tax deduction: This one is usually the biggie. You may be able to use the cost basis of your home (the original value when you purchased it) as the amount of your . This will allow you a deduction of up to 60% of your AGI (adjusted gross income). If you decide to take your deduction based on the appreciated value, the value of your home right now, your charitable deductions are limited to 30% of your AGI. It can be a bit complicated, you should talk to your trusted financial advisers when considering a house donation.
  • Avoid capital gains taxes: You and the charity of your choice are able to avoid capital gains taxes on the appreciated value of your house when you donate your property. Your donated real estate is worth more than if you sold the home yourself and donated the proceeds after taxes.
  • Minimize estate taxes: Transferring your property to a charity instead of leaving it to a loved one in your will remove the property from your estate, significantly saving money on estate taxes.
  • Make a difference: Donating a house will allow you to make a grand donation that may not otherwise be possible, and it can be done without the hassle and stress that goes with a home sale.

How to donate a house

Donating a house is a little more complex than other types of donations, but it does not have to be daunting. Here are the steps to help you have a smooth home donation:

  1. Talk with your chosen charitable organization. In order to be able to take a  from , it has to go to an IRS approved 501(c)(3) organization, such as . Once you confirm your charitable organization’s status, make sure they are able to accept a home donation. Lots of organizations will be thrilled to receive your generous home donation. For some other organizations, a home donation might not be a great fit due to the cost involved in maintaining or selling the home.
  2. Get a professional appraisal. The IRS requires an appraisal in order to give credence to the value of the real estate you would be donating. Although you may be tempted to just look up your property value online or through your local municipality, a professional appraisal may be able to give you a higher value and will also lend more weight if your  comes under scrutiny.
  3. Talk to your advisers. Your trusted tax adviser can guide you regarding the tax benefits of your charitable deduction. You should take an estimate of the fair market value, a record of your purchase date with the original cost of the property, and the amount you have spent on capital improvements to your adviser meeting.
  4. Pay off your mortgage. If you have yet to, consider paying off your mortgage before donating. This will greatly simplify the donation process and help keep the receiving organization from having to pay unrelated business income tax if they choose to sell the property. It is best for all parties to donate a home with a clear mortgage. If this is not possible or realistic, talk to your tax advisers and your chosen charitable organization to find out the best path for proceeding with the donation.
  5. Sign over the property and get a receipt. Once everyone is on the same page, you may proceed with the property transfer. Coordinate with your chosen charitable organization regarding utilities and any belongings that may need to be removed from the home. Do not forget to ask for documentation of your transaction from the charitable organization.

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